Title: A Most Private Discussion on Sensible Trading for the Long Term featuring Andreas Clenow

• Produced by: The Algorithmic Advantage
• Summary: In this episode, Andreas Clenow, renowned author and algorithmic trader, shares his insights on systematic trading, highlighting the importance of diversification, trend following, and multi-strategy approaches. He discusses his influential books—Following the Trend, Stocks on the Move, and Trading Evolved—which cover futures, equities, and Python programming for traders. Clenow also introduces his new mobile app Hush, which democratizes access to systematic trading with low-cost ETFs and fractional position sizing. He emphasizes the need for strategies tailored to individual risk profiles, while also delving into the evolving role of technology in trading and back-testing. Additionally, Clenow gives a glimpse into his new fiction novel set in the secretive Swiss banking world, offering unique lessons on finance.

Title: Trading Serenity within the Chaos

• Produced by: The Algorithmic Advantage
• Summary: In this episode, Tom Basso, famously known as “Mr. Serenity” from Jack Schwager’s New Market Wizards, shares his calm and disciplined approach to trading, even on a volatile market day. Tom emphasizes the importance of mindset, explaining how traders often sabotage their own systems by letting emotions take control. He discusses the power of small position sizing and risk management to maintain emotional stability, along with his systematic trading approach that utilizes multiple strategies across diverse markets. Tom highlights the role of technology in his trading process and shares insights on volatility targeting, diversification, and his famous random entry experiment, which proves that exits and position sizing are more crucial than entry points. Throughout the episode, Tom’s zen-like philosophy shines, offering valuable lessons on staying calm and collected in turbulent markets.

Title: Trading Think Tank: The Battle of the Back-Testers

• Produced by: The Algorithmic Advantage
• Summary: In this episode, Jason Strimpel and Marsten Parker share their expert insights into the art and science of back-testing in systematic trading. Jason, a Python expert, discusses the technical challenges and benefits of using tools like Zipline Reloaded for back-testing, while Marsten introduces RealTest, his custom-built application that allows traders to quickly and accurately test strategies. The conversation highlights the importance of using high-quality data and rigorous methods to avoid overfitting and ensure robust strategy development. Both experts emphasize the need for diversification, risk management, and a disciplined approach to building trading models that can stand the test of time in real market conditions.

Title: Laurens Bensdorp: Balancing 55 Super Models

• Produced by: The Algorithmic Advantage
• Summary: In this episode, Laurens Bensdorp, a seasoned systematic trader, shares his approach to multi-strategy diversification, trading over 55 strategies across various markets. Laurens emphasizes the importance of building diverse strategies, such as trend following, rotational momentum, and mean reversion, to capture profits in all market conditions. His “four legs” of trading—long and short trend following and mean reversion—form the foundation of his portfolio. Laurens highlights the critical role of risk management, stop losses, and small bet sizing in protecting against market volatility, particularly in equities. He also discusses the power of automation in managing his complex portfolio and reflects on the importance of patience and adaptation, sharing lessons from 2022’s challenging market conditions. Laurens’ disciplined, diversified approach offers invaluable insights for traders at all levels.

Title: Gary Antonacci II: New Research & Updated Models

• Produced by: The Algorithmic Advantage
• Summary: In this episode, we explore a new research paper titled “A Century of Profitable Industry Trends” by Zarattini and Antonacci, which examines the performance of a long-only trend-following strategy applied to industry portfolios over nearly 100 years. The strategy leverages both time-series and cross-sectional momentum across 48 industries, yielding impressive results with an 18.2% annual return and a Sharpe Ratio of 1.39. Key takeaways include the importance of volatility-targeted position sizing, sector rotation with ETFs, and robust risk management to minimize drawdowns. The strategy uses Keltner and Donchian Channels for entry and exit points, ensuring timely responses to market trends. We also discuss Gary’s updates to his models, emphasizing channel breakouts and dual momentum as a meta-strategy for rotating capital. Tune in to discover how these insights can be applied to modern trading practices.

Title: Corey Hoffstein: Return Stacking, ETF’s & Trend Replication

• Produced by: The Algorithmic Advantage
• Summary: In this episode, Corey Hoffstein, Chief Investment Officer of Newfound Research, discusses the importance of understanding market participants and their decision-making processes. He emphasizes how business decisions, while optimal for firms, can lead to sub-optimal trading decisions, creating opportunities for traders. Corey introduces the concept of Return Stacking, a portfolio strategy that layers alternative strategies like trend-following on top of traditional stock and bond allocations to enhance returns and diversification. He also delves into the construction of ETFs and the replication of futures trend-following strategies, highlighting how ETFs must be liquid, scalable, and cost-efficient. The conversation sheds light on the intersection of market infrastructure, business motivations, and trading strategy replication, offering valuable insights for traders seeking to capitalize on inefficiencies in the market.

Title: The Illusion of Backtests and Drivers of Price

• Produced by: Top Traders Unplugged
• Summary: In this episode of the Systematic Investor Series, Niels Kaastrup-Larsen and Rich Brennan dive into the current state of global markets, reflecting on recent volatility and the resilience of trend-following strategies. Despite early setbacks in sectors like the Japanese yen, NASDAQ, and the S&P 500, trend followers have seen a recovery, highlighting the adaptability of systematic models. They discuss how turbulence in both markets and trading systems parallels the experience of flying through severe weather: while external conditions may be rough, well-constructed strategies remain structurally sound. Rich emphasizes the importance of discipline in sticking to robust models and avoiding emotional responses that can undermine performance. They also touch on the potential impact of AI on trends and market dynamics, concluding that trend following remains a powerful and enduring approach. The episode provides a thoughtful exploration of trading psychology, strategy resilience, and the value of systematic approaches in uncertain times..

Articles

Title: It’s Prime Time for Trend Following Strategies as Macro Divergence Continues

• Produced by: Aspect Capital
• Summary: In this article, it’s highlighted that trend-following strategies are well-positioned to capitalize on the current macroeconomic environment marked by divergence and dispersion across asset classes and geographies. The post-pandemic normalization of inflation, interest rates, and monetary policies has created a landscape of unpredictability, offering fertile ground for trend-following strategies. These strategies, known for their directional agnosticism, allow investors to profit from both rising and falling markets, making them effective tools for both growth and defensive portfolios. Commodities, often underrepresented in portfolios, offer significant opportunities, as demonstrated by recent surges in cocoa prices. Financial markets, too, have shifted, with trends re-emerging in bonds and equities after years of QE and synchronized global policies. Institutions are increasingly integrating trend-following strategies into broader portfolios due to their ability to adapt, capture “unpredictability alpha,” and mitigate risk in dynamic market conditions..

Title: Trend Following and Risk Factor Diversification in 2022 and 2023: A Tale of Two Extremes

• Produced by: Quantica Capital
• Summary: The first quarter of 2024 proved insightful for trend-following strategies, revealing a stark contrast between 2022 and 2023. In 2022, trend-following CTAs thrived due to a few dominant global cross-asset risk factors, with inflation playing a central role. Conversely, 2023 posed significant challenges, with performance driven by over 30 independent risk factors, marking one of the most diverse environments for trend-following in recent history. The findings underscore the inverse relationship between trend-following performance and the number of risk factors: fewer risk factors correlate with stronger performance. While concentrated investment universes can succeed when driven by systemic risks, diversification is critical in periods governed by numerous idiosyncratic market trends, demonstrating that broader investment universes yield better results over time, particularly in adverse environments. Ultimately, the key takeaway is that the complexity of market dynamics in 2023 made universe diversification essential to harness profitable trends.

Title: The Illusion of Time: Why Backtests Can’t Predict the Future in Trading

• Produced by: ATS Trading Solutions
• Summary: The article emphasizes the limitations of relying solely on backtesting to predict the future performance of trading strategies, as backtests operate in a perfect, hindsight-driven environment. While backtesting offers valuable insights into a strategy’s robustness, it often leads to overfitting and unrealistic expectations when applied to dynamic, real-world market conditions. The piece advocates for more rigorous methods such as out-of-sample testing, walk-forward analysis, and real-time simulations, which better reflect the unpredictable nature of markets. These approaches challenge traders to develop strategies that can withstand real-time trading conditions and avoid the deceptive comfort of backtests. The article calls for raising industry standards to ensure that strategies are not only robust but also transparent and capable of delivering sustainable success, urging traders to prioritize more honest and reliable methodologies for evaluating performance.

Title: Warren Buffett’s Wisdom Meets the World of Outlier Hunting

• Produced by: ATS Trading Solutions
• Summary: In this article, we explore how Warren Buffett’s famous quote, “Diversification is protection against ignorance; it makes little sense if you know what you are doing,” aligns with the philosophy of Outlier Hunting in trading. While Buffett advocates for focused investments grounded in deep knowledge, as Outlier Hunters, we concentrate on capturing rare, extreme market moves—the fat-tail events that truly matter. Rather than spreading our portfolios thin across a wide range of assets, we deploy uncorrelated trend-following systems that remain dormant during periods of market noise and progressively activate when a true outlier emerges. Much like Buffett, who concentrates on a few exceptional companies, we direct our capital and attention to trades with the potential for significant returns. The key lies in understanding serial price correlation and utilizing staggered activation to build positions gradually as outliers unfold. Our strategy is not about blind diversification; it’s about concentrating on trades where the upside is substantial, maximizing returns from rare events while avoiding the pitfalls of over-diversification. Just as Buffett’s success stems from his deep understanding of select businesses, ours comes from focusing on the fat-tail regions of market returns, where the real opportunities lie.

Title: Are Financial Markets Governed by Stochastic or Chaotic Processes

• Produced by: ATS Trading Solutions
• Summary: The article explores whether financial markets operate under stochastic (random) or chaotic processes, challenging the traditional view that price movements are purely random. Drawing insights from Tim Palmer’s work in “The Primacy of Doubt,” the author highlights how noise—often dismissed as irrelevant—can reveal deeper patterns in financial data. Palmer’s concept of stochastic rounding shows that adding noise to data can actually amplify signals, preserving crucial information rather than obscuring it. This idea is applied to financial markets, where what appears to be chaotic noise may hold fractal structures that repeat across different time scales, revealing underlying trends. The article suggests that markets may behave like complex systems, where small, seemingly insignificant events can trigger large-scale movements. By embracing noise as a stabilizer, rather than something to filter out, traders and analysts may gain clearer insights into market behavior. Ultimately, the article proposes that financial markets may not be purely chaotic or stochastic, but a combination of both, where chaos introduces new patterns and noise amplifies the signals necessary to identify them.

Title: From Stochastic Models to Chaos: Understanding Financial Markets Through Non-Linear Dynamics 

• Produced by: ATS Trading Solutions
• Summary: The article explores how chaos theory, rather than traditional stochastic models, provides a more accurate framework for understanding financial markets. While stochastic models treat market movements as random and independent, chaos theory reveals that markets behave like complex, adaptive systems influenced by small initial changes that can lead to significant outcomes. Financial markets exhibit fractal structures, where small price fluctuations mirror larger trends, creating feedback loops that amplify or dampen price movements. Unlike stochastic models, which overlook these dynamics, chaos theory explains how market crises, bubbles, and extreme events emerge from seemingly minor triggers. By embracing chaos and recognizing the fractal nature of markets, traders and investors can better navigate the uncertainties, identifying deeper patterns and trends often hidden within market noise. This perspective moves beyond the oversimplified random-walk models, offering a more comprehensive understanding of market behavior and its inherent unpredictability.

Title: Fractals: The Geometry of Complexity in Nature and Markets 

• Produced by: ATS Trading Solutions
• Summary: Fractals offer a profound framework for understanding complex systems, from natural ecosystems to financial markets. Their self-similar, repeating patterns across scales reveal how seemingly random systems are governed by deeper, underlying rules. In nature, fractal structures like tree branches or blood vessels maximize efficiency in resource distribution, while in cities, they optimize urban growth. In financial markets, fractals explain how small price movements mirror larger trends, demonstrating that market behavior is not purely random but driven by chaotic dynamics. Fractal geometry also aligns with power laws, which show that extreme events, like market crashes, occur more frequently than traditional models predict. These “fat-tail” events, often seen as anomalies, are actually integral to the system’s structure. By recognizing these patterns, traders and analysts can better manage risk and anticipate market volatility. Ultimately, fractals and chaos theory provide a powerful lens for understanding and navigating the complexities of both natural and human-made systems, ensuring more resilient strategies in a world governed by uncertainty.

Books/E-Publications

Title: Short Stories from the Outlier Hunters

• Produced by: ATS Trading Solutions
• Summary: This collection of articles, titled “Short Stories,” reflects on the profound impact of outliers in trading and the importance of diversification. It includes insights on trend following, emphasizing strategies to capture rare market movements and optimize returns. The articles delve into the mechanics of various trading systems, the role of market and system diversification, and the relevance of complex adaptive systems in financial markets. This compilation aims to provide valuable knowledge and inspiration for traders at all levels.

Title: Scale: The Universal Laws of Life, Growth and Death in Organisms, Cities and Companies

• Produced by: Geoffrey West
• Summary: In Scale, Geoffrey West, a renowned theoretical physicist, masterfully uncovers the hidden laws that govern both natural and human-made systems, from living organisms to cities and businesses. Through a brilliant exploration of complexity science, West reveals that seemingly chaotic and diverse systems are governed by simple, universal principles of scalability. His groundbreaking research shows how scaling laws can predict everything from the lifespan of mammals to the growth of cities and the success or failure of companies. West’s writing is both intellectually stimulating and accessible, blending deep scientific insights with engaging anecdotes. Scale is a must-read for anyone curious about the forces that shape our world, offering a fresh and profound perspective on life, growth, and sustainability across all scales of existence. This book is a dazzling scientific journey that redefines how we understand the interconnectedness of nature, society, and economics.

Title: Signals and Boundaries: Building Blocks for Complex Adaptive Systems

• Produced by: John Holland
• Summary: Signals and Boundaries by John H. Holland presents an overarching framework for understanding complex adaptive systems (CAS), such as ecosystems, markets, and governments, through the study of signals and boundaries that define their internal structures. Holland explores how agents within these systems organize into hierarchies through the exchange of signals and formation of boundaries, which evolve over time. By offering insights into the mathematical models and mechanisms underlying these systems, the book serves as a guide for steering and comparing CAS in various fields like biology and economics.

Title: Following the Trend: Diversified Managed Futures Trading, 2nd Edition

• Produced by: Andreas Clenow
• Summary: In the revised second edition of Following the Trend: Diversified Managed Futures Trading, hedge fund founder Andreas F. Clenow provides an in-depth guide to systematically managing assets using CTA fund strategies. Covering performance data from 2002 to 2021, Clenow explores the evolution of markets, strategies, and the CTA industry, highlighting the impact of low interest rates, the rise of quant trading firms, and the increasing homogeneity of CTA funds. He also offers practical insights into combining various trading models for enhanced performance, making this book an invaluable resource for retail traders, portfolio managers, and institutional investors.

News

Title: East Coast Capital Management Wins Best Global Macro & Managed Futures Fund Award

• Produced by: Richard Brennan
• Summary: I couldn’t resist sharing the exciting news that East Coast Capital Management has just been awarded Best Global Macro & Managed Futures Fund 2024 at the Australian Alternative Investment Awards! This accolade is a tribute to the hard work and dedication of the team, particularly Adam Havryliv, Founder and CIO. Our Classic Trend Following strategy, focused on capturing large price movements and embracing market volatility, continues to excel. With macroeconomic divergence on the rise, we’re optimistic about the future and ready for more success! Well done, team!

Trend Following Performance

Title: Trend Following Performance Report — August 2024: “A Challenging Month for Trend Followers”

• Produced by: ATS Trading Solutions
• Summary: August 2024 proved difficult for trend-following strategies, marked by volatility and sharp market reversals. The SG Trend Index fell by -4.51%, bringing YTD performance to 1.29%, with disruptions in equity markets and commodities like Wheat and Soybean Oil. The TTU Trend Following Index also saw a -4.09% decline, though it remains positive YTD. Despite these challenges, the month highlighted the importance of discipline, robust risk management, and long-term strategies for navigating unpredictable markets successfully.