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Model Based Moment Fund The efficiency
and real-world success of a trading model is usually dependent on two
variables. The simplicity of the algorithm, the amount of trades produced by
the algorithm and the amount of human adjustment. The aim is to generate the
highest IRR with the simplest method, the least amount of trades and without
the need to interfere and adjust for different trading environments. The simplicity is
a good predictor of future success because the more complicated an algorithm
the more likely that it is retrofitted to describe the past data and that it
will fail in future trials. The amount of trades generated is also important
due to the transaction costs. It is
probably possible to generate enormous theoretical returns with a complex
algorithm that executes 150 trades a day but after transaction costs are
factored in, the end result would be a disaster. Any backward testing of a
trading algorithm should also be without any human interference (such as
assertions that in reality an intelligent human would interfere in October
2008 and then give back the control to the algorithm in mid
2009) to test the long-term predictive power of the algorithm. Model Based Moment Fund aims to execute one of three trading models developed by the site owner. This model is based on theory that sudden movements in markets predict the beginnings of a large trade execution by a large player. The model, adjusted for transaction costs, has generated a Sharpe Ratio of 2,17 and a Sortino Ratio of 2,54 at 8% minimum return level, for the last 5 years. |
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Since Inception Relative Performance Graph vs
DJIA and 7 -10 Year Bond Index Latest Trades
Comments Apr 17th’ 12
11:18 I plan to
activate the model if get the Dow down to 12500 level or after we get a May’
12 pullback. I just wanted to post an update to confirm that I still manage
this Fund. Jan 9th’ 12
9:53 The model is
still suppressed as I still hold the opinion that there is the need for a
capitulation before the market can make sustained moves although that has not
happened yet and the higher markets have hurt the Fund. Still, before that
capitulation arrives the risk of unexpected external shocks is too high to
run the model. I increased the bearish positions in the fund to take
advantage of the higher recent markets as the moves are not supported by EUR
or bonds participation. Dec13th' 11
10:51 I just
swapped the short position on the UltraShort Dow30
to a long position in UltraPro Short Dow 30. It is
the exact same exposure to the expected downside move in markets. However,
the swap was for more technical reasons. For the same given movement in
markets the SDOW will provide a better return. I lost about 0.1% in making
the swap but the result should easily compensate for that. Dec 2nd' 11
11:37 Given we
still haven't corrected the %8 jump in the markets I will suspend the models
buy and sell signals and maintain a short exposure to Dow 30 until the
markets become range bound or correct the steep jump so that the risk of huge
overnight crash is lessened. Since Inception Performance Chart vs Equity and Bond Benchmarks
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Latest Trades
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