Strategies/systems in all market conditions

[yonnie]

hi folks,

wonder if members use a system that can be traded in an uptrending, downtrending and sideways market.

most systems like Darvas are more suitable for a bull market.

any takers?

 

[tech/a]

A common belief that systems "Should" perform in all market conditions.

As strange as that maybe.
Bit like expecting to catch all fish types on only one bait.

Systems can/should be designed for different Conditions/Markets/Timeframes/Personal Requirements/Investment Capital to name a few.
To expect or even attempt to have a "One size fits all" system is inefficient.

 

[yonnie]

like with almost anything: maybe there are exceptions.

and wouldnt that be a lot easier?

 

[It's Snake Pliskin]

A common belief that systems "Should" perform in all market conditions.

As strange as that maybe.
Bit like expecting to catch all fish types on only one bait.

Systems can/should be designed for different Conditions/Markets/Timeframes/Personal Requirements/Investment Capital to name a few.
To expect or even attempt to have a "One size fits all" system is inefficient.

A bit like sending a trawler up a creek to catch mullet, and sending a boy on a surfboard to catch sharks in the Pacific ocean.

 

[Temjin]

I view this very simply.

Markets will only ever either trend or counter-trend with the differences only in their magnitude and volatility.

A truly adaptive system can be developed to trade and profit from all different markets as long as the logic behind the adaptive rules are statisically sound.

I would also certainly agree that "one size fit all" system is inefficient, but most people view their system as "non-adaptive" and require individual optimisation all the time to fit for different conditions/markets/time frame, etc.

While I am still developing a system like this, I know someone (not personally) that is actually doing exactly what I wanted to do. Very impressive results so far as well, over 600% compounded return in 20 months period with fairly consistence results. His methodology is extremely sound as well.

So yes, I believe it is possible to develop a system (which can comprises of many adaptive elements and even mini-systems) to trade all markets in ALL conditions and is statisically proven.

Of course, this is my belief only and can obviously change with time.

 

[It's Snake Pliskin]

I view this very simply.

Markets will only ever either trend or counter-trend with the differences only in their magnitude and volatility.

A truly adaptive system can be developed to trade and profit from all different markets as long as the logic behind the adaptive rules are statisically sound.

I would also certainly agree that "one size fit all" system is inefficient, but most people view their system as "non-adaptive" and require individual optimisation all the time to fit for different conditions/markets/time frame, etc.

While I am still developing a system like this, I know someone (not personally) that is actually doing exactly what I wanted to do. Very impressive results so far as well, over 600% compounded return in 20 months period with fairly consistence results. His methodology is extremely sound as well.

So yes, I believe it is possible to develop a system (which can comprises of many adaptive elements and even mini-systems) to trade all markets in ALL conditions and is statisically proven.

Of course, this is my belief only and can obviously change with time.

When you say "different markets" do you mean different exchanges or market conditions?

 

[Temjin]

Both, stocks, futures, currencies, commodities, etc, etc.

Trending and non-trending.

 

[yonnie]

temjin,

where can I view those statistics that prove the validity of that system?

 

[tech/a]

Wouldnt mind a look myself.
600% in 20 mths is pretty good.

Mind you in the last 20 mths I wouldnt say that the market has been in ALL market conditions would be interesting to see the last month V the rest.

Sure you can develope a system that can do as you say-- but a "one fits all" system that out performs systems designed specifically for particular market conditions.

Id Like to see that.

 

[yonnie]

I would rather use 1 system, even if the results are a little less than 3 optimized systems.

when the market change, you`ll have to unwind your positions from the one system and often at a loss and opportunity cost and put the capital to work in the next system appropriate for that market.
that all takes time and then the market might change again.

a system that might work in a up and down market is to go for eod short/medium term trends.
more likely you`re then not looking at stocks, but at bigger markets like SPI and ES, liquid futures on comms and forex.

you dont care if the market is up or down and if that particular market is flat, you`re looking for another market that is trending.

so there is where I might have to look and not just stocks.

 

[Temjin]

Okay, it's in the IASG database, so one would need to register for a free basic account in order to gain access to their database.

Before I post the information here, I need to warn everyone about the risk involved in such investment schemes. Investment information regarding Future managed funds (or hedge funds) are usually only available to accredited investors who live in the US. To those who are not aware of this term, it means you must have a net worth (not asset) or at least USD $1 million dollar or have an annual income of over $200,000 in the last 3 years.

Personally, I think the restriction is b---****, but after thinking about it, it was designed to protect those who are less finanically educated from investing in these risky schemes that they don't have any understanding of. Of course, people like Tech/A have more than enough technical / fundamental knowledge to understand these schemes.

Anyway, such regulations do not apply in Australia.

However, before anyone getting excited about this, or ANY OTHER programs and potential for reward depicted on the website (and/or from any other CTA services providers), please make sure you fully understand the risk involved in these future managed funds before going around to your friends, cousins, mums and dads asking for money to invest in them.

These investment schemes are NOT for regular investors! Be warned here! Read the big grey text on the bottom of the website and educate to understand how these programs work before even think about it.

As usual, please get advices from your financial planners before investing in such schemes. (though I doubt many would understand them either hehe)

Here we go,

The program is called Edge Investment Management - Global Diversified.

I have attached a pdf print out of the program detail for those who are too lazy to sign up for an account.

The Due Diligence Questionnaire can also be downloaded on that page as well if you want to find out more. (though it lacks of other similar documents)

For a brief snapshot of the program's potential, if you invested $1 in the program at its inception on August, 2005, you would have earned a compounded return of over 670% to date. (672.66% to be exact in 23 months)

I will leave it up to everyone else to do their own research.

 

[yonnie]

I only have a feeling that these markets are a lot more difficult to crack.

because of the high leverage, the brainiest peope will be there to earn their million+ a year and it will be more difficult to have an edge.

if people in this type of trading say they made 30% last year I`m not sure if thats now so great or safe.
You take out the leverage and they really made about 3.75% - 4% unleveraged.

I find that scary in a way that it could have turned into a loss quite easily.

 

[yonnie]

temjin,

thanks for the pdf.

in my opinion: you can be very brainy on the subject of futures, but when you hand over your money to these people, you`ll just have to kneel and pray.

ofcourse they will not reveal exactly how they trade so you have no way of testing their strategy for yourself.
furthermore they`re changing it all the time.

you just have to hope that they will think of EVERY eventuality.

 

[Temjin]

temjin,

thanks for the pdf.

in my opinion: you can be very brainy on the subject of futures, but when you hand over your money to these people, you`ll just have to kneel and pray.

ofcourse they will not reveal exactly how they trade so you have no way of testing their strategy for yourself.
furthermore they`re changing it all the time.

you just have to hope that they will think of EVERY eventuality.

very true.

That's why one of the market wizards alway say, the best investment scheme to invest in the world is in my own trading.

Who knows? The fund manager might one day decide to cross the street in a hurry and get himself run over by a car or something. There is a certaintly a risk there. haha

 

[acetrader]

hi yonnie,

I believe all system have to exploit "the trend" to make monkey.

If you are a one-way-trend-follower just trade the up or down trend and leave the sideway market for other traders. If you grab all the money in the market, what can we eat? Just take a break after a long trend riding.

Good Luck!

 

[Pairs Trader]

professional traders use arbitrage systems, that is exploiting the differences between two correlated instruments, arbitrage methods don't rely on market direction or volatility as your always taking a long and short position at the same time so your betting on the relationship of 2 instruments which is more predictable than the outright direction of the market, most of these strategies actually thrive in uncertain environments like the current one, lots of inefficiencies, the simplest form of arbitrage is pair trading stocks.

 

[acetrader]

professional traders use arbitrage systems, that is exploiting the differences between two correlated instruments, arbitrage methods don't rely on market direction or volatility as your always taking a long and short position at the same time so your betting on the relationship of 2 instruments which is more predictable than the outright direction of the market, most of these strategies actually thrive in uncertain environments like the current one, lots of inefficiencies, the simplest form of arbitrage is pair trading stocks.

Nice to hear from you. Your are right, I forgot the arbitrage. I tried some arbitrage trades at soy beans futures. It rans smoothly.

 

[julius]

professional traders use arbitrage systems, that is exploiting the differences between two correlated instruments, arbitrage methods don't rely on market direction or volatility as your always taking a long and short position at the same time so your betting on the relationship of 2 instruments which is more predictable than the outright direction of the market, most of these strategies actually thrive in uncertain environments like the current one, lots of inefficiencies, the simplest form of arbitrage is pair trading stocks.

I'm sorry but I don't agree. What you are doing is not arbitrage at all. You are simply betting on a assumed relationship between two instruments.

You're right that the overall position is less sensitive to the market, ie. low beta, but you can also achieve this just by balancing open long and short positions.

 

[lesm]

I'm sorry but I don't agree. What you are doing is not arbitrage at all. You are simply betting on a assumed relationship between two instruments.

You're right that the overall position is less sensitive to the market, ie. low beta, but you can also achieve this just by balancing open long and short positions.

Statistical arbitrage or spread trading - look it up.

 

[julius]

Lesm,

I know what statistical arbitrage is. I think it's completely bogus.

This kind of strategy does not describe arbitrage at all. Any statistical relationship in the market is subject to risk/uncertainty because markets are non-stationary. You can't make traditional statistical inferences about markets because the variables you're modeling are constantly shifting.

By definition I can classify any kind of strategy with a positive expectation as statistical arbitrage, simply because the market doesn't price the expectation correctly.

I don't think there's anything wrong with Pairs Trader's methods, I just don't think it's right to call it 'arbitrage'.