Trend following on the short side

I would be a fool to expect to have that return annualized and have it every year. I designed the system to have a high MAR (Calmar ratio) and therefore included ETF's covering a wide range of asset classes. Also, I don't trade for a living and therefore had to design a system that has holding periods of weeks rather than minutes.

The system as traded on C2 uses 1:1 leverage (i.e. 100%). My expectation for Max DD is 15% to 20%. Given that some of the ETF's I use are relatively new, it is impossible to perform a 15 year backtest, for example, to get a very good feel for the Max DD to be expected.
 
The return generated by a trend trading system depends on the strength and duration of the trends of the underlying securities plus the amount of leverage that is used. C2 limits the amount of leverage at 1:1 which I agree with for the site but I use a slightly higher leverage personally.

The backtested CAGR is north of 50% but that is based on a somewhat optimized system. In this case, the results are somewhat optimized because of the ETF's selected and the parameter settings in my algorithms. However, all ETF's used are equally weighted so I am not using the benefit of hindsight to optimally weight my holdings.

The best hedge funds average 30%. If you check the long term results as per the Hennessee Group, you will find that the average hedge fund return is just over 12%/year.

Based on the above, I expect an average return between 25% and 35%. If all the asset classes trend sideways it will be impossible to generate high returns. The system as presented on C2 holds a maximum of 25 ETF's but I monitor more than that. This way, I have a higher likelihood than I would otherwise have of being fully invested at any time.
 
Quote from HuggieBear:

Testing a short system during one of the steepest downtrends in history is bound to be pretty effective. The question is what did that same system do the 80% of the time the market is going up?
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You right...I just wanted to demonstrate short trend performance. This is how the system has performed 2002 - 2010:

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Quote from HuggieBear:

I have spent a couple of years building and trading intermediate and longer term trend following systems. I've developed a few systems mostly focused on equity indexes as well as commodity futures, and I've had pretty good success.

I've spend a tremendous amount of time trying to develop some decent mechanical short trend following systems but haven't been able to come up with much.
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The markets have been in an uptrend for nearly 2 years. Did you test your intermediate/long term mechanical short trend following systems during the decline from October 2007 through March 2009? That would be where an intermediate/longer term short trading system would make sense.

I'm not sure what your definition of intermediate/long term is, though. If it's trading weekly/monthly swings off trend/channels, then short and long strategies should work similarly, with the longs running longer and the shorts (pullbacks in the long term uptrend) running shorter, time-wise.
 
I think you can try to use 2 things
1. Use a Filter to enter Shorts..so Bull Markets keep your short system mostly on sidelines fo
2. Exit Short when Profit Target hits...Not on pullback
I think short + Long system will always perform better than a Long only system..But combination of 2 is important..Not Just long only or Short only
I think using Tradingblox as a development platform will help you see things in new light
RM
 
Quote from Kobayashi:

What software are you all using to backtest?
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I use Metastock and Amibroker. The reports I posted came fram an older version of Metastock. I have a lot of systems there, around 150 or so, and I have no time to move them.
 
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