Pre-2008/ZIRP, trendies could include T-bill interest in their returns (since futures use little margin), which contributed a "free" ~⅓ Sharpe, and created an optical illusion of good returns. Plus, post- 2008 markets have become more difficult all around, more competitive (think HFT) and more crowded (there weren't multiple trendies with 10s of $billions pre-2008).
Fully automated futures trading
- Thread starter globalarbtrader
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I looked through factors, looks like QT was the switch that was flipped on.
www.schroders.com/en/us/insights/multi-asset/how-frightening-is-quantitative-tightening/
What's a volatility based system? Is it a breakout system?
Yes, in terms of daily ranges.
I did an investigation into trend following on UK LSE stocks with market caps of < £1bn.
The feature was defined as a moving average crossover (of % returns) with lookback of 6mo/2years, and the target was to predict the 12 month return.
It seems like in this scenario, trends had almost no predictive power whatsover.
The feature was defined as a moving average crossover (of % returns) with lookback of 6mo/2years, and the target was to predict the 12 month return.
It seems like in this scenario, trends had almost no predictive power whatsover.
Thanks for posting. This bit of self-described luck certainly vitiates any comparison with industry benchmarks:
Then in February there was a pronounced spike in vol that took a lot of people by surprise. Because I prefer to stay at least two months out in the contract space I didn't see such a sharp rise in price levels as in 'spot' implied vol, but it's also clear that I didn't have any position on between October and March, and thus avoided the spike entirely. What gives? Well basically I ran out of margin head room, and because VIX and V2X were very margin hungry I closed my positions in them. So a bit of luck there.
It's difficult to say exactly how much difference this made, but it probably added about 2% overall. So not a game changer, but clearly helped.
GAT
Thanks, GAT, for a great read. I have been trading a version of your strategy for a year now, and I am obviously underwhelmed by my performance. Obviously a year is far too short a timeframe to make a claim like "trendfollowing is dead". However, over what timeframe could I have sufficient evidence that I had "missed the party", and I should go back to my previous life as a strictly buy/hold index fund guy? Thanks.