Trendfinder Trading Systems

The intraday systems had losses for all but one system.  FedSwing exited profitable long trades in all 3 markets.

Lion had a winning week, and the other systems that traded had a losing week.  It’s been a brutal month with only Lion showing a nice gain.

Next week I will be posting results here for the new systems.  FYI volatility has been high this month, so the new systems have been trading most of the month and have large losses as well (but much better results year-to-date).  I guess the upshot is they are coming live during a fairly good-sized drawdown!

Trendfinder’s emini trading systems did not have any trades today.

Today was the second day in a row where it looked like the market was going to drop yet it rallied very strongly the last couple hours.  Most intraday systems had unprofitable short trades.  On the flip side, the FedSwing systems have been long since last Friday are looking good.

I will start posting results for the new systems and portfolio combinations starting Monday.  I am currently in the process of sending code to the brokers so trading should be able to start on Monday.

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

Most intraday systems went short and exited with losses.  MeanSwing II exited a long trade in the ES (S&P 500) for a loss.

3 systems had short trades today that were profitable.  3 systems had long trades that were losses.

Lion had a long trade today that ended with a nice profit.

It is clear from the results so far this year that most of the intraday systems are not performing within acceptable parameters.  One clear indication of this is that many have exceeded 1.5 times their previous max historical drawdown.  Your largest drawdown is always in the future, but you also have to stop trading at some point to protect capital.  These systems could certainly recover – and that may happen soon given the amount of volatility that could be coming with problems in Europe and possibly China and elsewhere – however I think it’s time to stop trading most of them.

The intraday systems perform best in markets with high volatility and under-perform during low volatility.  I have always left it up to the subscriber to choose when to turn systems off/on, but I now want include that within most of the systems themselves.  These new systems only trade during markets that typically provide the best results.  They use the VIX and/or the average daily range to determine the volatility of the market.  Each system uses a different measure to provide diversification.  I have almost finished the walk-forward analysis (to help confirm I am not over-fitting) and hope to have them ready to release within a week.  Since they will be trading less frequently and could go months without a trade, I will be reducing the lease fees.

It reminds me of many trader’s (and mine) biggest hurdle you have to overcome – over-trading.  When there is not a good trade opportunity you should just sit on your hands!  These new systems use that philosophy.  I have avoided taking this action for a while because I was afraid clients would get upset when they had periods where there were no trades (and broker’s aren’t crazy about it either), and I apologize for that.  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 about this please feel free to contact me.

It was a brutal week.  2 systems had a gain and the rest were down.  The potential good news is that volatility is picking up – if that continues these systems could do really well in the coming months.