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Blog postIt's April, which means the birds are singing, the trees are leafing, and I'm doing my annual review of my investing and trading performance.
The format will be familiar from previous years, but I'm going to be using the fact I've upgraded my live trading system to include a lot more detail about my futures trading performance.
TLDR: Last year my futures trading bailed me out during a market meltdown in which my long only portfolio underperformed a market that di -
Blog postA few days ago I was browsing on the elitetrader.com forum site when someone posted this:
I am interested to know if anyone change their SMA/EMA/WMA/KAMA/LRMA/etc. when volatility changes? Let say ATR is rising, would you increase/decrease the MA period to make it more/less sensitive? And the bigger question would be, is there a relationship between volatility and moving average?
Interesing I thought, and I added it to my very long list of things to think about (In fact I' -
Blog postWhen I was a spotty teenager I was a walking nerd cliche. I liked computers; both for programming and games. I was terrified of girls. I was rubbish at nearly all sports*. And I played D&D (and Tunnels and Trolls, and Runequest).
* Nearly all: Not, I'm not talking about the 'sport' of Chess: I was also rubbish at Chess and still am. But due to some weird anomaly I was a dinghy sailing champion at school, and later world champion.
I also remember reading the Fighting Fa -
Blog postOne of the upsides of having a (very, very minor) public profile is that you get a lot of people asking you for advice, which is flattering (and if you say otherwise, you need to consider just how first world that particular 'problem' is). The only downside of this is you get asked the same sort of question a number of different times. At some point it becomes worth writing a blog article about the subject, which saves time, but also means the person asking will get a much better answer
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Blog postRisk. Love it or hate it, well as a trader you have to deal with it even though none of us really like it. No, we'd all prefer to be one of those mythical traders you hear about on youtube or instagram who consistently make $1000 a day, and never lose any money. Sadly I am not in that unicorn like category, and as only real people read this blog neither are you unless you are one of the HFT fund managers who read this blog purely for comic relief.
("Dimitri! This guy is excited about -
Blog postAs most of you know I have a regular(ish) gig talking on the Top Traders Unplugged systematic investor podcast, every month or so with Niels Kaastrup-Larsen and Moritz Seibert.
Anyway on the most recent episode we got chatting about whether open or closed equity should matter when trading a position. More broadly, should your history of trading a position affect how you trade it now, or is it only what's happened in the market that matters?
Moritz and I had a bit of a -
Blog postRemember the handcrafting method, which I described in this series of posts?
Motivating portfolio construction
Methodology
Implementing
Testing
Adjusting portfolio weights for Sharpe Ratios
All very nice, all very theoretically grounded, except for one thing: the 'candidate matrices'. Remember, what we do is group our portfolio into subportfolios of 2 or 3 assets, and find some initial risk weights (following which there is some funny business involved -
Blog postThis is a blog post which has been coming for a while. It relates to a lot of themes I've discussed before, and a recurring conversation I've had with a few people.
As most regular readers will know, I run my trading strategy to hit a particular risk target. That risk target is expressed as an annual standard deviation of percentage returns, and happens to be 25%. But those details aren't that important here. What is important is that it is a long run average risk target. Over th -
Blog postThis is a blog post about forecasting vol. This is important, since as sensible traders we make forecasts about risk adjusted returns (as in my previous post), which are joint forecasts of return and volatility. We also use forecasted vol to size positions. A better vol forecast should mean we end up with a trading strategy that has a nicer return profile, and who knows maybe make some more money.
Mean reverting vol, and it's effect on forecast accuracy In my previous -
Blog postThis is a post about forecasts in trading systems. A forecast is a calibrated expectation for future risk adjusted returns. In more layman like terms, it is a measure of how confident we are about a bullish (positive forecast) or bearish (negative forecast).
Perhaps it is easiest to think about forecasts if we compare them to what is not: a forecast is non binary. A binary trading system will decide whether to go long, or short, but it does not get more granular than that. It will buy, or -
Blog postI set myself last year a goal of doing one blog post a month. I have an idea for an interesting series of posts related to forecast strength, which I'd hoped to find time to research and post about. However, I've been quite busy marking exams and pushing through the production trading code for pysystemtrade (it's now at the point where I can trade manually; auto trading is next. Expect a lot of posts once it's finished explaining how to use it for live trading).
So instead here's a post ab -
Blog post"How does your risk management work?"
... is a question I'm frequently asked.
In fact this is actually a difficult question, if you were to look at my open source python backtesting project pysystemtrade, you would struggle to point at a piece of code and say "Behold! Right there, that's the risk management part alright!". The reason is that the risk management in my trading system is endogenous (from the greek, meaning 'word used to mean intern -
Blog postTime for the annual review post, as my reviews follow the UK tax year which ended on the 5th April. And what a year it has been; well 10 months or so of fairly normal stuff, followed by several weeks of stomach churning market chaos.
Previous updates can be found here, here, here, here and here.
This post will follow the format of previous posts, but there will be some extra stuff related to the more recent market action in which I'll talk in so -
Blog postThis is the final post in a series aimed at answering three fundamental questions in trading:
How should we control risk (first post)How much risk should we take? (previous post)How fast should we trade? (this post)Understanding these questions will allow you to avoid the two main mistakes made when trading: taking on too much risk and trading too frequently. Incidentally, systematic traders can add another list to that sin: overfitting. But that is a topic too large to be covered i -
Blog postThis is the second of three posts aimed at answering three fundamental questions in trading:How should we control risk (previous post)How much risk should we take? (this post)How fast should we trade? (next post)These questions are extremely important, IMHO much more important than the question of which funky indicator to use.
I won't be able to discuss all the finer details of position scaling here, as the post would be extremely long. If you find my approach interesting, you may w -
Blog postStop losses are the most common method used by traders to control risk. However, they're often used inappropriately. In this post I'll quickly bust some of the myths around them, and explain how to use them properly.
This is the first of three posts aimed at answering three fundamental questions in trading:How should we control risk (this post)How much risk should we take? (next post)How fast should we trade? (final post)If you find my approach interesting, you may want to read some -
Blog postThis is part X of my series of blog posts on skew and kurtosis, where 2<X<5. Part X, because it depends on how you number them! If you were to read them in a logical order then the series looks something like this:A post on skew: measuring, and it's impact on future returnsA post on kurtosis: measuring, it's impact on future returns, and it's interaction with skew.A post on trend following and skew (which I actually wrote first, hence the confusion!)This post: on using skew and k
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Blog postIn my recent posts on skew and kurtosis I've put together a large number of ideas for possible trading strategies. The next step will be to create and test these ideas out. However I already know from my initial analysis that many of these ideas will probably have poor performance. This leaves me in something of a conundrum. In fact this is just one example of the conundrum that strategy developers face all the time.
Do I ignore these strategies completely, which will result in my h -
Blog postIn my last post, I stated my intention to write a series of posts about skew.
Slight change of plan, since one loyal reader suggested that I write about kurtosis. I thought that might be fun, since I haven't thought about kurtosis much, and the literature on kurtosis isn't as well developed. It turns out that considering both together leads to some very interesting results.
The plan is to basically repeat my previous analysis of skew for kurtosis. Then my subsequen -
Blog postSome bloke* once said "The most overlooked characteristic of a strategy is the expected skew of it's returns, i.e. how symmetrical they are"
* It was me. "Systematic Trading" page 40
Skew then is an important concept, and one which I find myself thinking about a lot. So I've decided to write a series of posts about skew, of which is the first.
In fact I've already written a substantive post on trend following and skew, so this post is so -
Blog postThis month* marks the release of my third book, with the snappy title "Leveraged Trading", and the slightly less snappy subtitle "A professional approach to trading FX, stocks on margin, CFDs, spread bets and futures for all traders".
Photo courtesy of Harriman House. As you can see, the book makes an excellent books-stand for itself
* Official publication date is 29th October. Actually I finished the book in late August, and I've had print copies in -
Blog post(Both) regular followers of this blog will have been on tenterhooks for many months now, waiting for my next post. I have been busy! First of all, I've been finishing my third book. More detail on that later, in the next post. I've also had a fair bit of holiday time. But mainly over the summer I've been building my own garden office.
Now a post about constructing a garden office might seem rather off topic in a quant trading/investing blog. But, (i) there has been a fair bit of interest i -
Blog postHard to believe, but it has been five and a half years since I had to go to an office to manage other peoples money, and exactly five years since I began systematically trading my own. Time then for another annual review. Perhaps it is confusing for overseas readers, but these reviews follow the UK tax year which runs from 6th April to 5th April, rather than any logical period like a calendar year (or even 1st to April to 31st March would make more sense, frankly).
Previous updates -
Blog postQuite a few of my recent blog pieces have been picked up by the lovely folk at allocate smartly. So I thought I'd write an asset allocation piece, as the readers of my second book "Smart Portfolios" probably feel neglected with the lack of articles on investment rather than trading.
Absolute or relative momentum?
The motivation for this comes from a table in my second book, which exposes an interesting problem. Here is the table (actually a slightly modifie -
Blog postIn this post I discuss a well known stylised fact of the investment industry: "Trend following is a positively skewed strategy".
Spoiler alert: yes it is (sort of), but it's much more complicated (and interesting!) than you might think.
A quick primer on positive skew
So what actually is positive skew? Essentially it's an asset, or trading strategy, whose returns have the following profile:A high proportion of relatively poor returnsThe losing returns ar
Titles By Robert Carver
Smart Portfolios: A practical guide to building and maintaining intelligent investment portfolios
Sep 18, 2017
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