Trendfinder Trading Systems

The intraday systems perform best in markets with high volatility and under-perform during low volatility.  To better control drawdowns, I have created new systems that only trade during markets with higher volatility.  They use the VIX and/or the average daily range to determine the volatility of the market.  They use varied measures to provide diversification (every system doesn’t use the exact same measure/filter).

To determine which existing systems to keep, I used an industry rule of thumb – if a system hasn’t exceeded 1.5 times its previous max historical drawdown then I kept that system.  Cougar II and Lion met this criteria.  I created new “Vol” versions for every system in addition to keeping Cougar II and Lion.  As an added simplification/robustness alteration, the new systems do not automatically filter out any days (all the current systems filter out FOMC announcement days and most monthly options expiration days).  You may trade the discontinued systems if you wish, however I will not be posting their results on the website or blog going forward.

Since these systems will be trading less frequently and could go weeks or even months without a trade, I will be reducing the lease fees.  Also, to simplify the fee structures and encourage people to take a long-term view when trading these systems, the payment options are now based on 3 months or 1 year.  See the leasing page for new pricing: http://trendfindertrading.com/leasing.html

The performance data on the website has been updated.  Take a look at the Systems page and/or Portfolios page for more info.  A summary of the comparison results is below (past performance is not necessarily indicative of future results):

5 YEAR HYPOTHETICAL RESULTS – May 1, 2007 to April 30, 2012

($50 roundtrip for commission & slippage included, see Disclosures)

When I did testing for these new systems, I tested from January 1, 2004 up to as current as last Friday.  In most cases the new systems did not have a higher net profit than the original systems.  When running the past 5 year results for this blog, I was quite surprised to see the net profits be higher than the original systems for this time period (I kept checking to see if I had made a mistake somewhere).  It was a nice surprise but don’t expect this to always be the case!  I do expect future drawdowns for the new systems to be lower than the drawdowns of the current systems (and profit/drawdown ratios to be higher) but do not expect the net profit to necessarily be higher.

A note about curve-fitting/over-fitting.  Some may look at these results and say “He just optimized for the best results and that is over-fitting.  These new systems won’t do as well going forward”.  If you had this thought good for you!  That is good thinking and that kind of thinking should help you tremendously in your investments.  I intentionally did not optimize for the best results.  What I did was create 4 different volatility filters and apply them to every system.  I never went back and changed any parameters – it was an out of sample test of these filters (with the exception of Jaguar Vol – I did do preliminary tests on Jaguar II when creating two of the filters).  To provide diversification I didn’t want to use the same filter for every system.  So, the one place where some curve-fitting comes into play is in picking the filter/combination to use for each system.  For each system I either picked the filter that had the best result or used more than one filter to allow more trades and have a different filter than the other systems.

My first concern is that your accounts are growing, and I think these new systems will support that better than the current ones.  If you have any questions please feel free to contact me!

Thanks,

gary