Fully automated futures trading

Discussion in 'Journals' started by globalarbtrader, Feb 11, 2015.

  1. sle

    sle

    Except S&P does not have 30% volatility :)
     
    #1391     Jan 19, 2018
    truetype likes this.
  2. True, but if you are able to endure that volatility, which I hopefully am, primarily since I know this money is for my retirement in 20+ years, it's a superior strategy.
     
    #1392     Jan 19, 2018
  3. truetype

    truetype

    Of course, that's pre-tax analysis. Buy/hold SPY is taxable only when you sell. If you pass it along at your expiry, your heirs get a step-up, so essentially it's tax-free for your entire lifetime. Whereas trendfollowing throws off taxable 1256 gains (you hope) every year.
     
    #1393     Jan 19, 2018
  4. sle

    sle

    Put the winners in your qualified account and losers in your taxable account... or at least do that based on expectation (i.e. the alpha leg of the trade and the hedge leg).
     
    #1394     Jan 19, 2018
  5. newwurldmn

    newwurldmn

    A 30percent volatility means a 60percent drawdown at 2 stdevs. Very few people can handle that emotionally and two stdevs happen more frequently than you would think
     
    #1395     Jan 19, 2018
    nbbo and CME Observer like this.
  6. truetype

    truetype

    Presumably all of a trendfollower's trades are (believed to be) "alpha legs."
     
    #1396     Jan 19, 2018
  7. Hmm.... Before I got into trend following, I was a die-hard efficient-market-theory buy/hold vanguard-index-mutual-funds-type. I did well with that strategy, but of course the returns weren't that great (although I probably was doing better than the average Joe, who was buying actively managed funds with a 1.5% management fee with worse returns than the index). As a buy/hold index fund person, I really didn't sell, even when the internet bubble crashed. So, I'm thinking I'm better off in this strategy since I can probably continue to withstand similar bear market drawdowns, with the bonus of higher expected returns.

    I appreciate everyone's replies. GAT, I hope I'm not derailing your thread.
     
    #1397     Jan 19, 2018
  8. isotope1

    isotope1

    Isn’t that vol is the std deviation of returns? So for example, I expect a Sharpe of 0.8 on vol of 25%. So my expected 1std profit and loss for the year is 20% +/- 25%, not just 25%. 2std would leave me in the range -30%..+45%, a 1 in 30 year occurrence (theoretically).

    Secondly, I do my back test with constant capital, whereas when I trade live I reduce position as a I lose money, so any drawdown ends up being way less than what the backtest might imply. (I think a 50% drawdown in my backtest might equate to 30% on my real geometric result.
     
    #1398     Jan 20, 2018
  9. Not at all - it's a fascinating discussion.

    GAT
     
    #1399     Jan 20, 2018
    itb likes this.
  10. I agree with the ranges you state. I was speaking in terms of average annualized returns. So, over a long timespan you will average out to 20% per year.
     
    #1400     Jan 20, 2018