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It's a negative skew strategy with positive expected returns. You just need to understand the prob distribution.

I think you can read up on Robert Carver's books (Systematic trading and Leveraged Trading) to see how he size up his positions. I also wrote a medium article on volatility targeting but this is more at the portfolio level. But could be useful for you (unsure if elitetrader will block it)...

Would some sort of dimension reduction like PCA be useful to get further insights? (Or did you do that for the clustering part?)

Consider volatility position sizing such as standard deviation or Average True Range (ATR)

You may look at Robert Carvers's Leveraged Trading too.

Sharpe ratio has to be evaluated alongside other measures such as skewness, drawdown.

Buying an index alone is not a fool-proof plan. There could be lost decades (think of Japan, US in 2000s, Sngapore in 2007 till now). There could be massive drops and you may require the capital at worst possible time which require you to liquidate when things are undervalued. In a nutshell, you...

Use sharpe & sortino ratio to compare. But be cognizant of the third and fourth moment of your strategies i.e. skewness and kurtosis.

For low frequency strategy, it makes more sense to use python.

Nice. Would be keen to see your backtested results when you are done:)

Interesting. This smooth over the parameter space. I will test it out in my system.

Just curious if anyone has seen this article before by @globalarbtrader previous firm, https://www.man.com/maninstitute/volatility-is-back-better-to-target-returns-or-target-risk In the article, it discusses how dynamic volatility switching may bring up the sharpe. In particular this para, In...

Wow 16% to -17% swing. Is this on a single instrument or the portfolio?

Any returns streams with inverse to low correlation but with positive expected returns; mathematically you can reap the benefits of better risk adjusted returns (std dev, drawdowns). With better risk adjusted returns, you could proceed to simply enjoy lower drawdowns or if you wish to bring up...

Hi @globalarbtrader Thanks for your comprehensive reply and noted your objections in using validation dataset for fitting a trend following model. And I guess it differs from conventional machine learning problems which are more data-driven (requires validation set for the 'feedback') than...

Sounds impressive. Are you doing discretionary or systematic trading?

Hi @globalarbtrader I'm still mulling over the bootstrapping (understand that you are using handcrafting now to derive the rule weights). Could I seek your advice in the following? 1. Did you frame your earlier optimization problem using training set, validation set and testing set? 2. Let's...

Just keen to follow up, how's your sharpe since 2016?

Sharpe of 1.7 from 2017 onwards based on risk parity multi asset strategy. But I expect it to degrade by half in the long term or approx ~ 1

Thanks @HobbyTrading Great to see you continuing the journey. I myself are running 2 systematic strategies through risk parity & volatility trading and am keen to add trend-following in futures to my portfolio. So your thread is a good read and reference. Just curious, what's the % of...