I trade mean reversion. But dont use stops. Instead I adjust leverage. I have never seen a trending market that didn't mean revert, eventually. I average down and up.
What is your edge ?
- Thread starter oilfxpro
- Start date
You mean dollar cost averaging with the trend?
Urrrrrr.... works great until it stops trending.
Yep, like NFLX.
If as a trader , you can consistently make money out of the markets , day in day out you come out with a profit , do you not have an edge over the market ?The assumption here is the trader uses some discretionary method ,is able to operate more efficiently than bots, can process trading information faster than most , can execute fast and has special information in his brain which is cognitively tuned to the markets.
No. Being profitable is not sign of an edge. Being a desretipnsry trader is not an edge. There are millions of them.
Edge is something very few people have and it is clearly defined. Lack of edge doesn't mean you can't be profitable. You can be a good athlete without taking steroids but taking steroids would clearly be an edge.
I think, perhaps we could find below some details of so-called Edge.
Q
http://www.hedgefundsreview.com/hed...648880/bluetrend-bluecrest-capital-management
Best Managed Futures Hedge Fund: shortlisted
While other managed futures funds are highly scientific in their analytical approaches, one of the areas in which the BlueTrend fund has an edge over its peers, according to BlueCrest Capital Management, is ability to leverage off the company's human traders as well as its systematic trading systems.
The company believes BlueTrend is able to make use of the market expertise that is contained within BlueCrest.
These traders and market experts are able to highlight reasons for any bias in data sets, help with timing of trades to ensure minimal market impact, warn of changes in market behaviour earlier than would be apparent from the observed data and also point out areas of inefficiencies in the markets which could be exploited in a systematic manner.
The systematic trend-following fund is highly diversified. It trades in over 150 markets across equities, fixed income, interest rates, foreign exchange, energy, metals, agriculturals and soft commodities. The strategy uses a system which continuously adjusts positions to reflect the most recent price observations.
Within each sector the model looks at 5-7 pairs of moving averages which are then combined using a mean-variance optimisation to give an expected return and cost. The average realised return of each of the individual markets within each sector is fed into the optimiser which then overweights those markets that have performed strongly. The strength of the trend in a particular market will govern the decision to enter the market, add to a position, or exit a market.
In this way the strategy allocates capital effectively, which the company says means the fund's draw downs are smaller than those normally associated with trend-following CTAs.
Long-term asset allocation is derived from the average return and risk of each sector relative to each other over a 10-year period.
Risk management is integrated into this decision process as a reversal or increase in volatility will reduce the trend conviction and most likely lead to a position reduction. Because the program is a continuous process, there are no discrete entries or exits. In a market where there is no clear trend, the positioning will be very small.
Another differentiator the company flags is its experience in over the counter (OTC) markets, which enable it to increase market diversification.
Its system is designed to scale in and out of markets in a gradual manner, providing superior performance in some trend reversals and choppy markets.
Ongoing research and development are believed by the company to be fundamental to ensure good performance with an exceptional risk/return ratio.
The BlueCrest systematic research team combines research, model development, implementation and execution functions. This program is supported by a 41-strong quantitative research and development team and a 51-strong systematic trading team.
BlueTrend, which launched in April 2004, has a return objective of 15%-20% a year against a Sharpe ratio of 1-2. The fund's annualised return since inception is 18.98% and its Sharpe ratio over the same period is 1.13.
The BlueTrend portfolio construction is regularly reviewed to ensure that it is optimised to target returns whilst maintaining diversification.
Fund facts: BlueTrend Fund
Full name of fund: BlueTrend Fund
Name of portfolio manager: Leda Braga
Name of investment/management company: BlueCrest Capital Management
Contact information: 3rd Floor NatWest House, Le Truchot, St Peter Port, Guernsey, GY1 1WD, Channel Islands (+44 (0)20 3180 3000; BlueCrestInvestorRelations@bluecrestcapital.com)
Launch date: April 1, 2004
Strategy: managed futures/CTA
Assets under management: $10.2 billion (at April 1, 2010)
Net cumulative performance since inception: 183.71% (at March 31, 2010)
Annualised return (12 months): 13.55% (at March 31, 2010)
Annualised return (since inception): 18.98% (at March 31, 2010)
Annualised volatility (12 months): 14.06%( at March 31, 2010)
Annualised volatility (since inception): 14.19% (at March 31, 2010)
Sharpe ratio (12 months): 1.00
Sharpe ratio (since inception): 1.13
Share classes: US dollar, euro, sterling
Administrator: GlobeOp Financial Services
Auditor: Ernst & Young
Custodian: JP Morgan Chase Bank
Prime broker: JP Morgan Securities; JP Morgan Markets; JP Morgan Clearing Corp and affiliates
Domicile: Cayman Islands
Listing: No
Management fee: 2%
Performance fee: 20% (above high watermark)
Minimum investment: $1 million, £1 million, â¬1 million
Redemption/liquidity terms: monthly with 30 days' notice
UQ
Q
http://www.hedgefundsreview.com/hed...648880/bluetrend-bluecrest-capital-management
Best Managed Futures Hedge Fund: shortlisted
While other managed futures funds are highly scientific in their analytical approaches, one of the areas in which the BlueTrend fund has an edge over its peers, according to BlueCrest Capital Management, is ability to leverage off the company's human traders as well as its systematic trading systems.
The company believes BlueTrend is able to make use of the market expertise that is contained within BlueCrest.
These traders and market experts are able to highlight reasons for any bias in data sets, help with timing of trades to ensure minimal market impact, warn of changes in market behaviour earlier than would be apparent from the observed data and also point out areas of inefficiencies in the markets which could be exploited in a systematic manner.
The systematic trend-following fund is highly diversified. It trades in over 150 markets across equities, fixed income, interest rates, foreign exchange, energy, metals, agriculturals and soft commodities. The strategy uses a system which continuously adjusts positions to reflect the most recent price observations.
Within each sector the model looks at 5-7 pairs of moving averages which are then combined using a mean-variance optimisation to give an expected return and cost. The average realised return of each of the individual markets within each sector is fed into the optimiser which then overweights those markets that have performed strongly. The strength of the trend in a particular market will govern the decision to enter the market, add to a position, or exit a market.
In this way the strategy allocates capital effectively, which the company says means the fund's draw downs are smaller than those normally associated with trend-following CTAs.
Long-term asset allocation is derived from the average return and risk of each sector relative to each other over a 10-year period.
Risk management is integrated into this decision process as a reversal or increase in volatility will reduce the trend conviction and most likely lead to a position reduction. Because the program is a continuous process, there are no discrete entries or exits. In a market where there is no clear trend, the positioning will be very small.
Another differentiator the company flags is its experience in over the counter (OTC) markets, which enable it to increase market diversification.
Its system is designed to scale in and out of markets in a gradual manner, providing superior performance in some trend reversals and choppy markets.
Ongoing research and development are believed by the company to be fundamental to ensure good performance with an exceptional risk/return ratio.
The BlueCrest systematic research team combines research, model development, implementation and execution functions. This program is supported by a 41-strong quantitative research and development team and a 51-strong systematic trading team.
BlueTrend, which launched in April 2004, has a return objective of 15%-20% a year against a Sharpe ratio of 1-2. The fund's annualised return since inception is 18.98% and its Sharpe ratio over the same period is 1.13.
The BlueTrend portfolio construction is regularly reviewed to ensure that it is optimised to target returns whilst maintaining diversification.
Fund facts: BlueTrend Fund
Full name of fund: BlueTrend Fund
Name of portfolio manager: Leda Braga
Name of investment/management company: BlueCrest Capital Management
Contact information: 3rd Floor NatWest House, Le Truchot, St Peter Port, Guernsey, GY1 1WD, Channel Islands (+44 (0)20 3180 3000; BlueCrestInvestorRelations@bluecrestcapital.com)
Launch date: April 1, 2004
Strategy: managed futures/CTA
Assets under management: $10.2 billion (at April 1, 2010)
Net cumulative performance since inception: 183.71% (at March 31, 2010)
Annualised return (12 months): 13.55% (at March 31, 2010)
Annualised return (since inception): 18.98% (at March 31, 2010)
Annualised volatility (12 months): 14.06%( at March 31, 2010)
Annualised volatility (since inception): 14.19% (at March 31, 2010)
Sharpe ratio (12 months): 1.00
Sharpe ratio (since inception): 1.13
Share classes: US dollar, euro, sterling
Administrator: GlobeOp Financial Services
Auditor: Ernst & Young
Custodian: JP Morgan Chase Bank
Prime broker: JP Morgan Securities; JP Morgan Markets; JP Morgan Clearing Corp and affiliates
Domicile: Cayman Islands
Listing: No
Management fee: 2%
Performance fee: 20% (above high watermark)
Minimum investment: $1 million, £1 million, â¬1 million
Redemption/liquidity terms: monthly with 30 days' notice
UQ
Psychology???
http://www.forbes.com/pictures/mdg45ghlg/leda-braga-2/
Q
Leda Braga
Rank: 35 (tie)
Firm: BlueCrest Capital Management
Headquarters: Geneva
Earnings: $50 million
One of the few women in the higher echelons of hedge funds, Leda Braga, 45, is the President of BlueCrest Capital Management. She manages BlueCrest's biggest fund, the $13.6 billion trend-following BlueTrend LTD. The fund, which BlueCrest plans to spin off in 2012 via an IPO, has returned a net of 16.67% annually since February of 2005. BlueTrend was just above break-even last year with a net return of 0.32%, Bragaâs stake in BlueCrest helped get her estimated earnings to $50 million. Braga holds a PhD in engineering from Imperial College.
UQ
http://www.institutionalinvestor.com/Popups/PrintArticle.aspx?ArticleID=2282306
...
...
...
http://www.forbes.com/pictures/mdg45ghlg/leda-braga-2/
Q
Leda Braga
Rank: 35 (tie)
Firm: BlueCrest Capital Management
Headquarters: Geneva
Earnings: $50 million
One of the few women in the higher echelons of hedge funds, Leda Braga, 45, is the President of BlueCrest Capital Management. She manages BlueCrest's biggest fund, the $13.6 billion trend-following BlueTrend LTD. The fund, which BlueCrest plans to spin off in 2012 via an IPO, has returned a net of 16.67% annually since February of 2005. BlueTrend was just above break-even last year with a net return of 0.32%, Bragaâs stake in BlueCrest helped get her estimated earnings to $50 million. Braga holds a PhD in engineering from Imperial College.
UQ
http://www.institutionalinvestor.com/Popups/PrintArticle.aspx?ArticleID=2282306
...
...
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TheBlackHand
Guest
No.
Firstly, you haven't defined what period you're considering. Days or years? One is a lucky streak, the other is probably an edge. In the latter case, the trader will understand what and why it is so. In the former, the trader will mistakenly think he has an edge, not knowing what an edge is, become too confident, increase his size, see the cycle change, and then be out of business.
Secondly, interesting that you place the scenario in the realm of 'bots', speed of information processing and the like. Mr Turtle has already demonstrated that edge can exist in any time frame. In fact, I'd suggest for 99% of people here, they are more likely to find an edge in a more relaxed approach.
I am not sure that's a real word
Yep. Edge is something built into your investment process that allows you to have an upper hand on competition. It could be technological, like that for HFTs, it could be access or transactional, like it is for market makers or it could simply be built into the decision-making process.
According to my first boss, it's clever twistedness and constant depression that make me a good trader. My edge, however, is in muli-faceted quantitative analysis of various risk premiums in the market.