[ScottMcNab]

boom…what did u decide re currency hedge Paul ?

[ScottMcNab]

Hi Julian.. these are his shorter term (eg rsi) strats on index etf ? He also had some 3-4 bar chart patterns (with names like blast off or something?) (for futures I think) that he published a book on…i tried testing these back in 2017 but didn’t have any joy…but I have always found the stuff he published with Cesar seemed to work fine
Cheers

[ScottMcNab]

Nov2023 Index ETFs (paper trading) 3.9%
currently holding ijp, ivv, vgs and ndq
prob go live in Jan so the next month likely to also be good on paper

[ScottMcNab]

Started paper trading aus domiciled world etf TF system….which then immediately exited 2 of the 4 positions….off to the races

[ScottMcNab]

The graph of drawdown seems to show it has always been in single figures? If I have read that correctly then results seem impressive…especially as it would be live results through covid and Ukraine war supply shocks etc and not just a hindsight back test ….whenever i constrain volatility to keep DD low my cagr plumets and I am not yet quite at 33 billion

[ScottMcNab]

Thanks Nick…as much as it hurts I think 3-4 SD move is what I will go with at this stage….which directs me more towards the “ETF index camp” for a long term system than individual stocks

[ScottMcNab]

Julian Cohen post=14186 userid=5314 wrote:

I think

Volatility: stddev(S.NetPct,20) * sqr (252)

I think that gives you 20 day annualised std dev

 

Hoping someone with better maths than me can help with my limited understanding of this metric please. I suspect I am misinterpreting it. The only statistics course I did was almost 30 years ago which puts me firmly into the “a little knowledge is dangerous” camp. If the distribution of returns was normal, then a 2 SD move would contain approx 95% of observations….but I believe that distributions of returns are not normally distributed and have fat tails such that a 3 (or even 4) SD move would not be unexpected. I am trying to use this metric 2 ways.

1. in backtesting of systems…eg… i have a long term trend following system with 15 cagr and -30% DD with 15% vola….i then change or optimise a metric and the DD drops to -24%….is this a real improvement of have I just curve fitted ? I find it so difficult to get a sufficient number of trades in one specific market that I don’t tend to reserve a small 5-10 year time frame for OOS as it doesn’t really provide a sufficient sample size. In the past I tried to answer this by taking it over to the AUS and TSX data sets and seeing if the change in the metric resulted in the same overall trend to backtest results. I have now also tried looking at the change in vola. If the improvement of DD from -30 to -24 resulted in no change to the vola (ie remained at 15% in this example) then I am less likely to think I have made a meaningful change than in the case where the lower DD was also accompanied by a drop in vola (eg to 12 or 13%)

2. deciding if a system is broken or needs to be shut down….along the same lines, using vola may be helpful in predicting future DD…rather than using the simple assumption that the system is broken if it reaches 2x the drawdown of the backtest (which is obviously only 1 or many possible outcomes), is it possible to extrapolate vola using a 3 or 4 SD move for a more meaningful estimate ?…so for a 3SD move it would be a case of doubling the vola and making it negative to get a likely future DD expectation….my concern is obviously that my lack of understanding regarding the distribution of the returns is leading to incorrect conclusions

Thanks 

[ScottMcNab]

Still on the sidelines…went to cash Feb 2022…boredom and FOMO led me trade July-Sep 2022 with about 5% of equity….missed carnage of 2022 but also missed out on rebound in 2023 so swings and roundabouts
Been playing around with ETF’s
ended up deciding on a model using Aus domiciled etf’s in hope of avoiding hedging currency risk…and also decided to limit myself to stock indices initially
as the USA makes approx half of world stock market I made 2 lists….one with Aussie plus other world markets and the second only USA Index etfs
I worry that this decision is curve fitting….the other possibility is to have a single list of all world index etfs and simply let the system pick
currently sticking with the 2 lists but would welcome feedback
each list (world ex-USA and USA) gets 50%
there are 18 etfs in world list and system picks 4
are only 4 in USA so system picks 2
no double ups

testing from 2014 onwards I came up with quite a few systems that seemed ok but was unable to decide…as I am essentially just trend following an index I took the systems and ran them over SPY from its onset….that knocked a few contenders out with large drawdowns….results of best system were cagr 9 maxDD 18  vola 11
so I then applied them to stocks themselves (using same entry criteria as an index filter) and ran them back to 1995… was only really left with a single system
when I run this back over my 2 lists of etfs from 2014 onwards I get a cagr of a bit over 8 and a max DD of about 16 (with vola a bit over 10)
It seems a bit underwhelming to be honest
Perhaps the results are not unreasonable for a simple trend following system on stock indices
 

[ScottMcNab]

I have spent an hour or so trying to process this but still struggle to comprehend fully what you went through Kate. Your strength and resilience are inspiring.

[ScottMcNab]

My condolences Kate. I have struggled regarding what to say as we had the same experience and I find it hard to address. If you could permit me one recommendation it would be to take up any offers of counselling or discussion that are available. Twenty plus years ago we were waved out the door and wished the best of luck.  I watched my wife struggle with the thought that if only she had done something (or not done something) then the outcome may have been different. This oversimplification is not, of course, the reality of the complex biology involved and I hope today these issues and relevant information are shared and discussed.

Regarding the markets, I am sure that everyone here has your best interests at heart but if you feel that getting involved back in the markets is what you need right now then I think (for what little its worth) you should go for it. Your plan to scale gradually back in seems well thought out.
 

[ScottMcNab]

The more I’ve played around with the Australian etfs the more I’ve come to appreciate how impressive these results are from 2014/15……10/-10 with vola of 10….its nice to have something to aim for

[ScottMcNab]

Thanks for sharing Nick. It would seem to lend itself to replacing the stock etf component with a simple 5 stock EOM rotational system on XTO or NDX perhaps…moving away from all weather type of system again but still relatively low effort….guessing bump for both cagr and maxDD…something for the weekend

[ScottMcNab]

I’ve also removed from short term systems but found long term trend following works better if I keep them (may just be for that system of course)

[ScottMcNab]

Spent month converting systems into RT. Traded for about 4-6 months using RT back in 2021 so had a framework to work and update from…been quite a few changes since then. Trading has just been with small account size to live test (1 mistake found so far)
 

[ScottMcNab]

No trading again in Dec….sat on sidelines for 3/4 of year so finished year flat

Happy New Year to all….pretty glad to see the end of 2022….roll on 2023

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