tag:blogger.com,1999:blog-261139923818144971.post5456264977383025682..comments2024-03-27T07:58:49.946+00:00Comments on This Blog is Systematic: Simulating my futures systemRob Carverhttp://www.blogger.com/profile/10175885372013572770noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-261139923818144971.post-57595938384722270102021-04-05T10:37:54.361+01:002021-04-05T10:37:54.361+01:0020% short bias
20% carry
60% momentum20% short bias<br />20% carry<br />60% momentumRob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-41428575123347730862021-04-04T21:20:56.182+01:002021-04-04T21:20:56.182+01:00Thanks Rob - so for volatility based futures only,...Thanks Rob - so for volatility based futures only, what weight do you attribute to this -10 forecast rule if you also had momentum and carry rules in the mix? A third each? Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-33692267678832468052021-04-01T15:13:16.373+01:002021-04-01T15:13:16.373+01:00I'm prepare to believe that markets don't ...I'm prepare to believe that markets don't trend 75% of the time, otherwise I'd be a lot richer :-) However given how highly correlated breakout and EWMA momentum is, I don't really think there is much difference for a *continous* system for both, as both will have smaller positions on when the trend is weaker.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-11445639903730291092021-04-01T13:45:42.829+01:002021-04-01T13:45:42.829+01:00Thanks for being direct, Rob, I don’t mind. ;-)
I...Thanks for being direct, Rob, I don’t mind. ;-)<br /><br />I first heard of this statement - that markets move in trading ranges 75% of the time - from a Paul Tudor Jones’s interview. I was also sceptical about this given that trend following works but when I measure the times markets are in a trading range vs trending using “classic breakout” rule on a 60 day look back on crude, I found out that it was actually true! <br /><br />At the moment I don’t have access to prices of other assets so I cannot expand my search but there might be more substance than it seems. That’s why I thought I would ask you. <br /><br />Thanks Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-78377876688386250932021-04-01T12:51:18.329+01:002021-04-01T12:51:18.329+01:00They're not crazy weights, and I would be happ...They're not crazy weights, and I would be happy to use them, although I wouldn't do so based on an in sample glance at a backtest and some intuition that doesn't make any sense and hasn't been properly checked (sorry if that sounds harsh, but what did you expect :-) )Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-2711121431986807052021-04-01T12:47:53.552+01:002021-04-01T12:47:53.552+01:00Thanks for your reply. If one had only access to t...Thanks for your reply. If one had only access to the following rules, would you agree with the following weights?<br /><br />1. single instrument momentum - 20%<br />2. Single instrument breakout - 30%<br />3. Single instrument Carry - 50%<br /><br />I have done some simple back testing and it seems that breakout makes more money than momentum. Intuitively, this might make sense because 75% of the time asset prices are in a range and the breakout signal will be quite weak if prices are hovering around the roll_mean. Whist pure momentum will lose more money in trading ranges due to whipsaws of prices. May I ask what your thoughts are on this? <br /><br />Thanks Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-49964611255566906742021-04-01T10:07:28.399+01:002021-04-01T10:07:28.399+01:00Not sure about the 'optimal' weights, but ...Not sure about the 'optimal' weights, but the weights I use vary by instrument. However a simple average is:<br /><br />short vol 1%<br />breakout 33%<br />Mean reversion in asset 10%<br />carry 20%<br />Momentum for a synthetic asset class. 11%<br />Normalised momentum 10%<br />Single instrument momentum 10%<br />Relative carry 5%<br /><br />Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-32864832338275783632021-03-31T19:19:34.269+01:002021-03-31T19:19:34.269+01:00Thanks Robert. May I ask what the optimal weights ...Thanks Robert. May I ask what the optimal weights are to each of the 8 rules? Although I believe that the systematic short volatility is specific to VIX only instruments? Thanks, RUnknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-41175646221339144882021-03-30T11:53:19.369+01:002021-03-30T11:53:19.369+01:00Not actually sure what I meant by 'theme' ...Not actually sure what I meant by 'theme' at the time, but here's a list of the eight rules:<br /><br />Momentum for a single instrument<br /><br />Carry<br /><br />Normalised momentum for a single instrument<br /><br />Mean reversion within asset classes<br /><br />Relative carry within asset classes<br /><br />Momentum for a synthetic asset class.<br /><br />Systematic short volatility.<br /><br />Breakout<br /><br />Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-87111978631330929222021-03-29T00:04:01.373+01:002021-03-29T00:04:01.373+01:00Robert - thanks for your reply.
Another QQ. In y...Robert - thanks for your reply. <br /><br />Another QQ. In your book “Systematic Trading”, you state that “I have 8 rules drawn from 5 different themes”. I believe momentum and carry are two of these 5 themes? Without going into much details, would you be able to share the other 3 themes? Thanks, RUnknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-57633669631475935032021-03-28T18:24:52.126+01:002021-03-28T18:24:52.126+01:00No, I apply those rules but I also apply a constan...No, I apply those rules but I also apply a constant -10 forecast rule; so the result is a short bias compared to the situation if the always short rule wasn't there.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-43258418698191119472021-03-28T00:26:24.483+00:002021-03-28T00:26:24.483+00:00Hi Robert - quick question. When you say that you ...Hi Robert - quick question. When you say that you sell volatility with a modest short bias, does it mean you keep a permanent short position, so that trend following and carry rules do not apply to VIX and V2X? Thanks!Unknownhttps://www.blogger.com/profile/05821050393149046409noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-73146677078001334962021-03-22T00:48:09.987+00:002021-03-22T00:48:09.987+00:00ok sure. thanks Rob. ok sure. thanks Rob. BFhttps://www.blogger.com/profile/16029658121221797298noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-68732061298863922312021-03-19T12:00:47.343+00:002021-03-19T12:00:47.343+00:00Yes: I'd want to check that the difference in ...Yes: I'd want to check that the difference in parameter estimates wasn't statistically significantly different (so it might be that one data set comes up with a parameter value of 10 but in fact there is so much noise you can't actually distinguish between the estimates)Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-13396923349072975422021-03-19T10:02:47.974+00:002021-03-19T10:02:47.974+00:00Rob, thanks for your response.
If I could ask fu...Rob, thanks for your response. <br /><br />If I could ask further, let’s say if I find that the optimal parameter for a strategy via backtesting on the 43 futures is 5 over the period 1980 to 2015. Would checking for the uniformity of backtested performance between shorter periods (ie 1980 – 1990 vs 1990 – 2000 vs 2000-2010 vs 2010-2015) for the strategy with parameter 5 help to ensure that the introduction of futures with shorter history after 1980 does not create any bias towards any instrument with shorter history?<br />BFhttps://www.blogger.com/profile/16029658121221797298noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-539131763101534532021-03-17T10:39:39.058+00:002021-03-17T10:39:39.058+00:00This is a very big question, which has to do with ...This is a very big question, which has to do with the consistency of parameter estimates over time and across instruments, and which of those you think is more important or problematic. And the honest answer is, I don't know. But my general experience is that parameters for the sort of trading system I run are quite stable over time, suggesting the approach of using more time for fewer instruments is the right one. Having said that, this is a serious question which would require a considerable amount of research to properly answer.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-74707031396263974102021-03-17T06:47:04.863+00:002021-03-17T06:47:04.863+00:00Hi Rob,
Nice post here. Regarding futures data, ...Hi Rob, <br /><br />Nice post here. Regarding futures data, I find Norgate Data to be pretty good, though a fee (6 months = USD 148.50, 12 months = USD 270) would have to be paid to access the data. <br /><br />Anyway, your post got me thinking about this question. <br /><br />As of March 2015 (when you wrote this post), you had data for 43 future whereas you had data for approximately 20 futures (based on my interpretation of the graph on this post) as of year 2000. <br /><br />If I could ask, “Wouldn’t the backtest be more appropriate if it is done on the 20 futures over the period, 2000 to 2015, since there is actual historical data for all these 20 futures over the whole period, instead of an expanding universe of futures (from around 4 to 43) over time (from 1978 to 2015) based on data availability? ”<br /><br />While diversification will definitely be lower if 20 futures instead of 43 futures were used, at least in the former scenario there is consistency in the instruments which the strategy is backtested on over those 15 years whereas in the latter scenario, the optimal trading parameters are identified from fitting the strategy on data with different instruments at different time period? <br /><br />BFhttps://www.blogger.com/profile/16029658121221797298noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-77020641817034718952020-11-23T09:04:57.678+00:002020-11-23T09:04:57.678+00:00Commodities are relatively uncorrelated with other...Commodities are relatively uncorrelated with other asset classes so a higher weight is justified. The difference with my book is that I used heuristic weighting, wheras the above are optimised.Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-12769467529363498152020-11-21T06:15:37.638+00:002020-11-21T06:15:37.638+00:00I am inspired by your books and have just started ...I am inspired by your books and have just started working on my own futures trading portfolio. In your calculated portfolio in this blog post, about 50% is allocated to commodity. Do you think it concerning if I do the same with my portfolio? Or the correlations of the 3 commodity classes low enough with each other, that can justify the high weight? Your recommendation in your book was to start with the 4 asset groups - 1)bond, 2)equity, 3)fx, 4)commodities, and once done then to go to the asset classes next including the 3 commodity classes. So I am a bit confused. Thanks for your advice!tokeihttps://www.blogger.com/profile/08138492337240890193noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-73669474396504941032020-09-09T13:36:02.393+01:002020-09-09T13:36:02.393+01:00Never mind my previous comment about picking rule ...Never mind my previous comment about picking rule weights. I have found the answer at https://qoppac.blogspot.com/2016/05/optimising-weights-with-costs.html<br />ThanksIKhttps://www.blogger.com/profile/17954611073329971173noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-74570133559419259812019-02-02T11:40:35.643+00:002019-02-02T11:40:35.643+00:00I can't possibly answer a question like that i...I can't possibly answer a question like that in a box this size!Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-8705925541541134852019-02-02T07:14:58.496+00:002019-02-02T07:14:58.496+00:00I need your advise on setting up risk controls. I ...I need your advise on setting up risk controls. I trade fx spot (20 times leverage) and just one symbol GBPJPY; fx futures and future options for trading EUR to make most of Span margin system. Mostly trading and risk managing manually. Returns r too good to be true 10% a month (9 pc drawdown). since fundseeder has captured it so I have to believe it. <br />I want to make an auto trader for GBPJPY with lots, risk and margin management rules. How do I go about it. Thanks Anonymoushttps://www.blogger.com/profile/05374866210563744825noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-25446037994986022202019-02-02T07:14:13.326+00:002019-02-02T07:14:13.326+00:00I need your advise on setting up risk controls. I ...I need your advise on setting up risk controls. I trade fx spot (20 times leverage) and just one symbol GBPJPY; fx futures and future options for trading EUR to make most of Span margin system. Mostly trading and risk managing manually. Returns r too good to be true 10% a month (9 pc drawdown). since fundseeder has captured it so I have to believe it. <br />I want to make an auto trader for GBPJPY with lots, risk and margin management rules. How do I go about it. Thanks Anonymoushttps://www.blogger.com/profile/05374866210563744825noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-14057174421742448312018-05-18T06:43:58.141+01:002018-05-18T06:43:58.141+01:00A few reasons: (a) I don't have OHLC data in m...A few reasons: (a) I don't have OHLC data in my current database, although I could easily take the first sample each day as open, (b) It's more conservative, if the market is fast moving you might not get the open price. I suppose a better measure might be the average of close and open on the following day (close to VWAP).Rob Carverhttps://www.blogger.com/profile/10175885372013572770noreply@blogger.comtag:blogger.com,1999:blog-261139923818144971.post-27845001925228827082018-05-17T20:43:32.990+01:002018-05-17T20:43:32.990+01:00Hi Rob, an older post but hoping you don’t mind a ...Hi Rob, an older post but hoping you don’t mind a new question on this. <br /><br />I’m intrigued why you backtest with a one day lag at the closing price, rather than just using the open price following a signal at close? <br /><br />Thanks - big fan of your books - looking forward to the next one? :) <br /><br />David Anonymoushttps://www.blogger.com/profile/16887600679285433839noreply@blogger.com