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For further reading on Trend Following

For those users interested in learning more about Trend Following, we recommend Michael Covel's April 2004 release entitled Trend Following: How Great Traders Make Millions in Up or Down Markets (ISBN: 0131446037 from bn.com or amazon.com) as a good resource . Covel analyzes historic performance data and shows that trend following can be an effective strategy for trading. In this book, Covel demonstates why trend following works and provides insight from some of the most successful trend followers ever.

Why you don't need real-time quotes

Extract of a chapter from book Trading Chicago Style: Secrets of Today's Top Traders (June 26, 1999), by permission of Neil Weintraub, Author :

 

"C.V. is a real trader. We agreed not to use his real name. He does not want the publicity nor frankly does he need it. He makes his living trading. I have three years of his trades. All are real time trades. I first talked with C.V. when he lived in Washington D.C. I saw his account statements and tried to urge him to trade a fund. Today he lives in upstate New York overlooking a quiet lake in an historical home (circa: 1830) that he and his wife are renovating. You will not find C.V. on any news group. Want to really meet a trader who trades from home and makes a living at it? Here is a rare opportunity."

 

Download the entire chapter in PDF format [162KB].

 

 

Maximizing Risk-Adjusted gains with Trade Management

Reproduced from Formula Research^TM, Volume V, No. 9 (June 21, 1997), by permission of Nelson F. Freeburg (sigma20@midsouth.rr.com), Editor. Formula Research is a financial letter that builds and tests trading systems and serves investors and traders in 25 countries.

 

"We take a $50,000 Futures Account to Over $500 Million Using Sensible but Little-Known Money Management Techniques"

 

"By the way, a striking $45 million of those profits were earned in the second out-of-sample period, that span of just 28 months that proved so disappointing earlier. This shows that portfolio management can not only boost returns and control risk but help offset the cycles of poor performance that sooner or later plague most trading systems"

 

Download the entire article in PDF format [75KB]

 

 

All Systems Go, System tune-up, Parts I & II

Published May 17, 2000 and Jul 6, 2000 at FuturesMag Website by Nelson Freeburg (sigma20@midsouth.rr.com), editor of Formula Research, a financial letter that builds and tests trading systems and serves investors and traders in 25 countries:

 

"In trading single lots across 19 markets going back 16 years, ATR gained $561,863, after transaction costs. There were 1,032 trades of which 460 were profitable, for a 46% batting average. If you started trading with a $50,000 account, you would have made 17.4% compounded annually. This may not sound like a lot, but is considerably higher than the return of the average professional commodity trader over that period. On the downside, maximum equity drawdown was notably high at 45%." [...] "I spent hundreds of hours testing the ATR system with a variety of money management tactics. The most profitable of the variants returned 66% a year. This means a $50,000 account would now be worth a striking $133 million. You often hear it said that money management is more important than signal accuracy. Our test results bear out this claim."

 

 

TRADING RECIPES and Fixed Fractional Strategies

Article (Jun 28, 2000) excerpted from one of a series of postings in an Internet forum:

 

"Since early January of 2000, this series of postings has described my project developing a fixed-fractional position-sizing strategy. I explained how I have developed the money-management methods I have been using in real time trading individual markets. In the last installment of this series, I announced that I was starting work on stage two of the project, the portfolio-testing stage, because I now have TRADING RECIPES --the only commercially available program for such testing." [...] "In sum, TRADING RECIPES has given me the means to finalize development of my fixed-fractional strategy. Without it, I would be flying blindfolded. In the future, I plan to be exploring alternative strategies that use a different fraction (f) for each market."

Download the entire article in PDF format [19KB]

 

 

Why traders lose (by OFOR)

A 48-page Analysis of the Profiles and Motivations of Habitual Commodity Speculators (May, 1997)

Download the entire article in PDF format [164KB]

 

 

Back-Adjusting futures contracts (by Bob Fulks)

To backtest a trading system for trading futures contracts, we would like to have a long duration of price data on which to test our trading system. The problem is that futures contracts expire periodically and the data for each contract lasts only a few weeks or months. So we need some way to create a long series of price data from a sequence of contract prices. This paper discusses the various ways it can be done and explores the advantages and disadvantages of each method. (11-May-2000)

Download the entire article in PDF format [38KB]