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Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 5:31 pm
by tadamsmar
willthrill81 wrote:
Tue Sep 10, 2019 4:57 pm
That's because the red line in that graph is for a 100% VTSMX portfolio, not a 60/40. When you run a timing model in Portfolio Visualizer, it automatically also includes a line for buy-and-hold of the timed asset(s).
Opps! I missed that.

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 5:41 pm
by tadamsmar
willthrill81 wrote:
Mon Sep 09, 2019 9:20 pm
For a more realistic comparison, a 60/40 AA would now have an inflation-adjusted balance of $7,032.
Does that $7,032 include rebalancing or not?

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 5:42 pm
by willthrill81
tadamsmar wrote:
Tue Sep 10, 2019 5:41 pm
willthrill81 wrote:
Mon Sep 09, 2019 9:20 pm
For a more realistic comparison, a 60/40 AA would now have an inflation-adjusted balance of $7,032.
Does that $7,032 include rebalancing or not?
Yes, annual rebalancing.

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 6:29 pm
by nps
willthrill81 wrote:
Tue Sep 10, 2019 4:56 pm
nps wrote:
Tue Sep 10, 2019 11:23 am
Do you think there is compelling evidence that trend following in retirement could maintain or increase the SWR over BAH? Or just that its minimization of deep drawdowns may be better psychologically?
The academic study I linked to above found that trend following would have significantly boosted the SWR. The historic improvement in risk-adjusted returns of trend following over BAH has not been merely psychological.
Thanks. I think this was the study and the context for the discussion:
willthrill81 wrote:
Mon Sep 09, 2019 9:08 pm
HomerJ wrote:
Mon Sep 09, 2019 9:07 pm
willthrill81 wrote:
Mon Sep 09, 2019 6:08 pm
But it does seem that trend following in general has been effective in smoothing out returns and avoiding the worst of stocks' drawdowns. For this reason, I believe that trend following might have much more benefit for retirees than accumulators.
No way should a retiree swing from 100% stocks to 0% stocks based on "signals", no matter how well they worked in the past.
Why not? Academic research has found that doing so would have been very useful for retirees.

Also, it is not necessary to go from 100% to 0%. The swing could be from 70% to 30%, for instance.
It looks like that study uses only 10 percent of the portfolio for trend following. Any evidence for the benefit when you "swing from 100% stocks to 0% stocks" as HomerJ puts it (and I understand is your implementation)? Or even slightly more mild like the 70% to 30% suggestion?

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 7:50 pm
by willthrill81
nps wrote:
Tue Sep 10, 2019 6:29 pm
It looks like that study uses only 10 percent of the portfolio for trend following. Any evidence for the benefit when you "swing from 100% stocks to 0% stocks" as HomerJ puts it (and I understand is your implementation)? Or even slightly more mild like the 70% to 30% suggestion?
No, they went from 100% to 0%.
Specifically we use the rule of Faber (2007) that if the index is trading above its 10-month moving average then a long position is taken, otherwise a position in cash is held instead.
p. 17

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 9:15 pm
by nps
willthrill81 wrote:
Tue Sep 10, 2019 7:50 pm
nps wrote:
Tue Sep 10, 2019 6:29 pm
It looks like that study uses only 10 percent of the portfolio for trend following. Any evidence for the benefit when you "swing from 100% stocks to 0% stocks" as HomerJ puts it (and I understand is your implementation)? Or even slightly more mild like the 70% to 30% suggestion?
No, they went from 100% to 0%.
Specifically we use the rule of Faber (2007) that if the index is trading above its 10-month moving average then a long position is taken, otherwise a position in cash is held instead.
p. 17
Reading it again, it seems to be only relative to the given BAH position. So if the BAH portfolio was 60/40, trend following would have you swing from 60% stocks to 60% cash, and from 40% bonds to 40% cash.

This is noted on the same page:
The application of trend following sees returns increase by between around 0.2% to 0.3% annually for the 60-40 and 30-70 portfolios

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 9:23 pm
by willthrill81
nps wrote:
Tue Sep 10, 2019 9:15 pm
willthrill81 wrote:
Tue Sep 10, 2019 7:50 pm
nps wrote:
Tue Sep 10, 2019 6:29 pm
It looks like that study uses only 10 percent of the portfolio for trend following. Any evidence for the benefit when you "swing from 100% stocks to 0% stocks" as HomerJ puts it (and I understand is your implementation)? Or even slightly more mild like the 70% to 30% suggestion?
No, they went from 100% to 0%.
Specifically we use the rule of Faber (2007) that if the index is trading above its 10-month moving average then a long position is taken, otherwise a position in cash is held instead.
p. 17
Reading it again, it seems to be only relative to the given BAH position. So if the BAH portfolio was 60/40, trend following would have you swing from 60% stocks to 60% cash, and from 40% bonds to 40% cash.

This is noted on the same page:
The application of trend following sees returns increase by between around 0.2% to 0.3% annually for the 60-40 and 30-70 portfolios
Yes, I believe that you are correct.

Re: My trend following strategy and experience

Posted: Tue Sep 10, 2019 11:49 pm
by Lee_WSP
For anyone curious to see all three plotted:
https://www.portfoliovisualizer.com/tes ... total1=100

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 2:28 am
by Always passive
Has anyone considered using low volatility funds/ETFs with trend following?

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 4:44 am
by Forester
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
I pair USMV off against rest of the world, using Excel to create a low vol ex-US proxy from EFAV & EEMV. I understand that studies of momentum by convention must use the S&P 500, but I'm trying to generate returns. If a low vol index does not contain lottery stocks or overweight lottery sectors, arguably it's a truer reflection of the broad trend.

It doesn't matter if low vol has slightly lower or higher return than the overall market, low vol tends to hold a higher price when markets sell off, so whipsaws hurt less as you sell higher and buy lower (QQQ & SPY tend to snap back quicker when markets recovers).

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 6:11 am
by nps
willthrill81 wrote:
Tue Sep 10, 2019 9:23 pm
nps wrote:
Tue Sep 10, 2019 9:15 pm
willthrill81 wrote:
Tue Sep 10, 2019 7:50 pm
nps wrote:
Tue Sep 10, 2019 6:29 pm
It looks like that study uses only 10 percent of the portfolio for trend following. Any evidence for the benefit when you "swing from 100% stocks to 0% stocks" as HomerJ puts it (and I understand is your implementation)? Or even slightly more mild like the 70% to 30% suggestion?
No, they went from 100% to 0%.
Specifically we use the rule of Faber (2007) that if the index is trading above its 10-month moving average then a long position is taken, otherwise a position in cash is held instead.
p. 17
Reading it again, it seems to be only relative to the given BAH position. So if the BAH portfolio was 60/40, trend following would have you swing from 60% stocks to 60% cash, and from 40% bonds to 40% cash.

This is noted on the same page:
The application of trend following sees returns increase by between around 0.2% to 0.3% annually for the 60-40 and 30-70 portfolios
Yes, I believe that you are correct.
On my first comment, the 10 percent trend following concept was actually in a different paper. This studied 50% stocks, 40% bonds, and 10% managed futures. It found that the 4% safe withdrawal rate could be increased to 4.8% when compared to a standard 50/50 portfolio.

Interestingly it also found that a 50% trend following stock and 50% bond portfolio had a meaningfully lower SWR than 4%.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 8:14 am
by Forester
nps wrote:
Wed Sep 11, 2019 6:11 am

Interestingly it also found that a 50% trend following stock and 50% bond portfolio had a meaningfully lower SWR than 4%.
But this would only be exposed to stocks 35% over the long term.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 9:44 am
by willthrill81
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 10:29 am
by BlueEars
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Is there enough long term data to check out low volatility funds? When I looked very briefly at USMV it only goes.back to 2012.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 10:31 am
by willthrill81
BlueEars wrote:
Wed Sep 11, 2019 10:29 am
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Is there enough long term data to check out low volatility funds? When I looked very briefly at USMV it only goes.back to 2012.
I would not personally feel the need to have lots of data about these funds before implementing a trend following approach with them. They are just stocks after all.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 10:53 am
by BlueEars
willthrill81 wrote:
Wed Sep 11, 2019 10:31 am
BlueEars wrote:
Wed Sep 11, 2019 10:29 am
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Is there enough long term data to check out low volatility funds? When I looked very briefly at USMV it only goes.back to 2012.
I would not personally feel the need to have lots of data about these funds before implementing a trend following approach with them. They are just stocks after all.
I like to see a few decades of monthly data (Yahoo history tab) so we differ on this point. I like to see how a few bear markets played out. Of course this does not give complete assurance for the next bear market but I think history is instructive.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 11:44 am
by Always passive
BlueEars wrote:
Wed Sep 11, 2019 10:29 am
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Is there enough long term data to check out low volatility funds? When I looked very briefly at USMV it only goes.back to 2012.
That is not true. The iShares low volatility ETFs follow the MSCI indices. Thus, if you search the MSCI website, you can find data on most of the iShares low volatility indices since the 80s.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 12:44 pm
by Forester
USMV is very blue chip... Johnson & Johnson, McDonalds, Microsoft, Mastercard etc. If it's a 2000 or 2008 selloff then USMV will follow suit. USMV should be SPY but a smoother journey which is ideal for trend following.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 2:15 pm
by BlueEars
I will check out the MSCI data when I get back to the US.. Thanks.

Re: My trend following strategy and experience

Posted: Wed Sep 11, 2019 2:31 pm
by aristotelian
BlueEars wrote:
Wed Sep 11, 2019 2:15 pm
I will check out the MSCI data when I get back to the US.. Thanks.
For those who want to see it, looks like it shaved about 10% off the drawdown in 2008 and also outperformed the S&P in the 2018 Q4 mini-bear.
https://imgur.com/a/DkUDCnJ

Re: My trend following strategy and experience

Posted: Fri Sep 13, 2019 11:24 am
by Always passive
BlueEars wrote:
Wed Sep 11, 2019 2:15 pm
I will check out the MSCI data when I get back to the US.. Thanks.
If you do not find the data (you can download it to Excel), write to me privately and I will help you find it.

Re: My trend following strategy and experience

Posted: Fri Sep 13, 2019 12:13 pm
by Forester
Aha, now I have the MSCI data. Month-end data before the ETFs went live around 2011, which is good enough. Min vol & large cap both exit in Feb 2008 and both re-enter in Nov 2009.

Re: My trend following strategy and experience

Posted: Thu Oct 03, 2019 9:29 am
by Busdrvr
Again I see August UE rate was 3.7 and below the MA(3.75)

Month end S&P and four of five Ivy Portfolio asset classes, exception being DBC(commodities), also remain invested and above their 10 and 12 mma’s.

Interesting action in the markets this week so far. Mfg and services looking a little anemic.

Re: My trend following strategy and experience

Posted: Thu Oct 03, 2019 9:57 am
by willthrill81
Busdrvr wrote:
Thu Oct 03, 2019 9:29 am
Again I see August UE rate was 3.7 and below the MA(3.75)
Right. As such, my strategy requires me to remain in stocks, even though TBM has had higher relative performance than any stock index over the last 7 months.

Re: My trend following strategy and experience

Posted: Mon Oct 07, 2019 8:43 am
by Forester
Newfound Research, one of the top dogs in the trend research space, weigh in on the Philosophical Economics article

https://blog.thinknewfound.com/2019/10/ ... following/

Re: My trend following strategy and experience

Posted: Mon Oct 07, 2019 8:35 pm
by tadamsmar
Just for grins, suppose that the UER was 3.7 for October (this month) and then flatlined for a year (i.e., stayed at 3.7).

You would remain at a "buy" signal till March 2020 (when the Feb. UER became available). Then you would get a "sell" signal for the next 8 months, and then you would get a "buy" signal again. (Assuming I have my math right.)

The so-called "trend signal" would change twice in that period even though UER was flatlining and not trending in either direction.

Not necessarily a bad thing, perhaps just a curious side-effect of the operational definition of "trending" in this system.

(Of course, you don't necessarily sell on what I am calling a UER "sell" signal. You do buy (if necessary) on what I am calling a UER "buy" signal.)

Re: My trend following strategy and experience

Posted: Mon Oct 07, 2019 8:54 pm
by JoMoney
https://blog.thinknewfound.com/2019/10/ ... following/
... Systematic active investing strategies are a way to achieve alternative return profiles that are not necessarily present when pursuing standard asset allocation and may therefore play an important role in developing well-diversified portfolios.

But these strategies are best viewed as allocations rather than trades...
LOL :D :D :D is there anything that can't be sold as "diversification"

Re: My trend following strategy and experience

Posted: Mon Oct 07, 2019 9:02 pm
by willthrill81
JoMoney wrote:
Mon Oct 07, 2019 8:54 pm
https://blog.thinknewfound.com/2019/10/ ... following/
... Systematic active investing strategies are a way to achieve alternative return profiles that are not necessarily present when pursuing standard asset allocation and may therefore play an important role in developing well-diversified portfolios.

But these strategies are best viewed as allocations rather than trades...
LOL :D :D :D is there anything that can't be sold as "diversification"
Your point is well taken. But if such strategies are basically capturing some portion of the momentum factor, it is plausible that they could represent a portion of one's portfolio, just like the other factors, providing some diversification from the results of a buy-and-hold strategy. This is what several notable investors have done (e.g. Merriman, Faber).

Re: My trend following strategy and experience

Posted: Tue Oct 08, 2019 10:49 am
by BlueEars
I am puzzling over the historical BLS unemployment data. This question popped up because of a new FRED "Real recession" indicator series: https://fred.stlouisfed.org/series/SAHMREALTIME . If you look at that series and the link to the full data set you read:
This indicator is based on "real-time" data, that is, the unemployment rate (and the recent history of unemployment rates) that were available in a given month. The BLS revises the unemployment rate each year at the beginning of January, when the December unemployment rate for the prior year is published. Revisions to the seasonal factors can affect estimates in recent years. Otherwise the unemployment rate does not revise.
Am I reading this correctly? This does not affect the month to month BLS data as it comes out but could the BLS data historically be messed up by the systematic "seasonal factors". In other words, if one uses the BLS data to backtest will it be a true representation of what was available in real time to the investor?

FRED now publishes two "Sahm" indicators, a real time one and one based on the UNRATE employment data (which originates from the BLS data). That second one is slightly different, see: https://fred.stlouisfed.org/series/SAHMCURRENT . I think that the UNRATE data incorporates the revised BLS unemployment data. If you compare the charts of the 2 series you see a slight difference in this second series relative to the "real time" series. The part to focus on is where the unemployment data just starts to rise relative to it's trend. Here are the charts plotted together:

Image

They look very close, however if using the unemployment turning point they may be quite different. You can see this for say, the data prior to the 1969 recession. Here is that chart for recent years and the data is not too different:

Image

So I wonder if the "real time" historical data is available or is that data beyond the recent year somewhat distorted by "seasonal factors"? Anyone understand this or have a link to the BLS "real time" data going way back?

Re: My trend following strategy and experience

Posted: Tue Oct 08, 2019 10:56 am
by jayhawkerbeef
Sorry if it’s mentioned prior, is this methodology being used in a taxable account? I’ve experimented with some timing strategies in this space, but the tax hit always concerns me.

Re: My trend following strategy and experience

Posted: Tue Oct 08, 2019 11:17 am
by willthrill81
jayhawkerbeef wrote:
Tue Oct 08, 2019 10:56 am
Sorry if it’s mentioned prior, is this methodology being used in a taxable account? I’ve experimented with some timing strategies in this space, but the tax hit always concerns me.
I don't have any taxable accounts because I'm blessed with a lot of tax-advantaged space. But this strategy could be implemented in a taxable account through the use of futures contracts to effectively zero out one's stock position without actually selling one's stock and triggering capital gains.

Re: My trend following strategy and experience

Posted: Fri Oct 11, 2019 9:36 pm
by BlueEars
I was literally off line the last few days being involved in the Northern California PGE shutdown. Anyway I see there was no comments on my previous post on the different unemployment statistics (real time versus seasonally adjusted).

Now that I think of it, there is probably no cause for alarm on my part. The OP's (and also my use) of the unemployment data is to look for relative changes in this series so probably using the BLS historical data is not an issue. In other words, both the so called "real time" data seen by the investor was probably the same in relative behavior as the historical possibly seasonally corrected data we now have access to.

Re: My trend following strategy and experience

Posted: Fri Oct 11, 2019 10:03 pm
by willthrill81
BlueEars wrote:
Fri Oct 11, 2019 9:36 pm
Now that I think of it, there is probably no cause for alarm on my part. The OP's (and also my use) of the unemployment data is to look for relative changes in this series so probably using the BLS historical data is not an issue. In other words, both the so called "real time" data seen by the investor was probably the same in relative behavior as the historical possibly seasonally corrected data we now have access to.
Requiring 'signals' from two disparate metrics to move out of stocks results in less sensitivity minor issues that might come up with either alone. I feel very comfortable with my strategy and am staying the course.

Re: My trend following strategy and experience

Posted: Fri Oct 11, 2019 11:12 pm
by BlueEars
willthrill81 wrote:
Fri Oct 11, 2019 10:03 pm
BlueEars wrote:
Fri Oct 11, 2019 9:36 pm
Now that I think of it, there is probably no cause for alarm on my part. The OP's (and also my use) of the unemployment data is to look for relative changes in this series so probably using the BLS historical data is not an issue. In other words, both the so called "real time" data seen by the investor was probably the same in relative behavior as the historical possibly seasonally corrected data we now have access to.
Requiring 'signals' from two disparate metrics to move out of stocks results in less sensitivity minor issues that might come up with either alone. I feel very comfortable with my strategy and am staying the course.
If I understand you correctly that is not what I was on about. I am not concerned with signals from 2 separate metrics. What I was concerned about is this statement from Sahm:
This indicator is based on "real-time" data, that is, the unemployment rate (and the recent history of unemployment rates) that were available in a given month. The BLS revises the unemployment rate each year at the beginning of January, when the December unemployment rate for the prior year is published. Revisions to the seasonal factors can affect estimates in recent years. Otherwise the unemployment rate does not revise.
If I understand this statement, it means that the BLS unemployment data that reaches further back has been seasonally adjusted. This is the data we can obtain by download from the BLS. So it does not exactly correspond to what the investor would have seen in "real time" and what we want to simulate for trend following purposes.

After thinking about it, I am guessing that it is somewhat similar with maybe a minor offset to the "real time" data.

Does this make sense or have I missed something in interpretation of that statement?

EDIT: If I am right on the above, I think the "real time" BLS data which is what a trend follower would use is going to catch unemployment rises earlier then the historical BLS data. That would probably lead to better trend following results.

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 9:38 am
by Lee_WSP
BlueEars wrote:
Fri Oct 11, 2019 11:12 pm
willthrill81 wrote:
Fri Oct 11, 2019 10:03 pm
BlueEars wrote:
Fri Oct 11, 2019 9:36 pm
Now that I think of it, there is probably no cause for alarm on my part. The OP's (and also my use) of the unemployment data is to look for relative changes in this series so probably using the BLS historical data is not an issue. In other words, both the so called "real time" data seen by the investor was probably the same in relative behavior as the historical possibly seasonally corrected data we now have access to.
Requiring 'signals' from two disparate metrics to move out of stocks results in less sensitivity minor issues that might come up with either alone. I feel very comfortable with my strategy and am staying the course.
If I understand you correctly that is not what I was on about. I am not concerned with signals from 2 separate metrics. What I was concerned about is this statement from Sahm:
This indicator is based on "real-time" data, that is, the unemployment rate (and the recent history of unemployment rates) that were available in a given month. The BLS revises the unemployment rate each year at the beginning of January, when the December unemployment rate for the prior year is published. Revisions to the seasonal factors can affect estimates in recent years. Otherwise the unemployment rate does not revise.
If I understand this statement, it means that the BLS unemployment data that reaches further back has been seasonally adjusted. This is the data we can obtain by download from the BLS. So it does not exactly correspond to what the investor would have seen in "real time" and what we want to simulate for trend following purposes.

After thinking about it, I am guessing that it is somewhat similar with maybe a minor offset to the "real time" data.

Does this make sense or have I missed something in interpretation of that statement?

EDIT: If I am right on the above, I think the "real time" BLS data which is what a trend follower would use is going to catch unemployment rises earlier then the historical BLS data. That would probably lead to better trend following results.
Don't they make notations about whether the data was corrected and what it was before?

If not, you can find news articles on that particular day about what was reported.

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 10:21 am
by BlueEars
Lee_WSP wrote:
Sat Oct 12, 2019 9:38 am
....

Don't they make notations about whether the data was corrected and what it was before?

If not, you can find news articles on that particular day about what was reported.
This is referring to decades of BLS data for back testing purposes. Not to just a few months.

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 7:35 pm
by Lee_WSP
BlueEars wrote:
Sat Oct 12, 2019 10:21 am
Lee_WSP wrote:
Sat Oct 12, 2019 9:38 am
....

Don't they make notations about whether the data was corrected and what it was before?

If not, you can find news articles on that particular day about what was reported.
This is referring to decades of BLS data for back testing purposes. Not to just a few months.
Since the 12mma UE rate only crosses a few times during the backtest period, can't we just fact check that month & the preceding 3 months?

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 7:47 pm
by BlueEars
Lee_WSP wrote:
Sat Oct 12, 2019 7:35 pm
BlueEars wrote:
Sat Oct 12, 2019 10:21 am
Lee_WSP wrote:
Sat Oct 12, 2019 9:38 am
....

Don't they make notations about whether the data was corrected and what it was before?

If not, you can find news articles on that particular day about what was reported.
This is referring to decades of BLS data for back testing purposes. Not to just a few months.
Since the 12mma UE rate only crosses a few times during the backtest period, can't we just fact check that month & the preceding 3 months?
Probably but I don’t know how to get real time U3 data for say 1973. Do you have a link? FRED has UNRATE data but that is BLS data which I think is seasonally adjusted.

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 9:26 pm
by Lee_WSP
BlueEars wrote:
Sat Oct 12, 2019 7:47 pm
Lee_WSP wrote:
Sat Oct 12, 2019 7:35 pm
BlueEars wrote:
Sat Oct 12, 2019 10:21 am
Lee_WSP wrote:
Sat Oct 12, 2019 9:38 am
....

Don't they make notations about whether the data was corrected and what it was before?

If not, you can find news articles on that particular day about what was reported.
This is referring to decades of BLS data for back testing purposes. Not to just a few months.
Since the 12mma UE rate only crosses a few times during the backtest period, can't we just fact check that month & the preceding 3 months?
Probably but I don’t know how to get real time U3 data for say 1973. Do you have a link? FRED has UNRATE data but that is BLS data which I think is seasonally adjusted.
News articles from the date?

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 9:34 pm
by BlueEars
Lee_WSP wrote:
Sat Oct 12, 2019 9:26 pm
BlueEars wrote:
Sat Oct 12, 2019 7:47 pm
Lee_WSP wrote:
Sat Oct 12, 2019 7:35 pm
BlueEars wrote:
Sat Oct 12, 2019 10:21 am
Lee_WSP wrote:
Sat Oct 12, 2019 9:38 am
....

Don't they make notations about whether the data was corrected and what it was before?

If not, you can find news articles on that particular day about what was reported.
This is referring to decades of BLS data for back testing purposes. Not to just a few months.
Since the 12mma UE rate only crosses a few times during the backtest period, can't we just fact check that month & the preceding 3 months?
Probably but I don’t know how to get real time U3 data for say 1973. Do you have a link? FRED has UNRATE data but that is BLS data which I think is seasonally adjusted.
News articles from the date?
Years ago I actually went to the library and used microfiche to get at some news and data. That would be a project I'm not up to now. I might try emailing the author of the Sahm FRED charts.

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 10:44 pm
by Lee_WSP
BlueEars wrote:
Sat Oct 12, 2019 9:34 pm
Lee_WSP wrote:
Sat Oct 12, 2019 9:26 pm
BlueEars wrote:
Sat Oct 12, 2019 7:47 pm
Lee_WSP wrote:
Sat Oct 12, 2019 7:35 pm
BlueEars wrote:
Sat Oct 12, 2019 10:21 am

This is referring to decades of BLS data for back testing purposes. Not to just a few months.
Since the 12mma UE rate only crosses a few times during the backtest period, can't we just fact check that month & the preceding 3 months?
Probably but I don’t know how to get real time U3 data for say 1973. Do you have a link? FRED has UNRATE data but that is BLS data which I think is seasonally adjusted.
News articles from the date?
Years ago I actually went to the library and used microfiche to get at some news and data. That would be a project I'm not up to now. I might try emailing the author of the Sahm FRED charts.
They may be digitized and searchable now.

Re: My trend following strategy and experience

Posted: Sat Oct 12, 2019 11:39 pm
by whodidntante
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Why does every managed futures fund seem to languish, then? Are all of them doing it wrong? Serious question.

Re: My trend following strategy and experience

Posted: Sun Oct 13, 2019 3:13 am
by Forester
whodidntante wrote:
Sat Oct 12, 2019 11:39 pm
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Why does every managed futures fund seem to languish, then? Are all of them doing it wrong? Serious question.
1) Futures are a zero sum game, excess return must be "given" by the hedgers. There are more speculators competing to provide insurance to the commercial hedgers, and all participants have more information & computing power than was the case in the 1980s/90s

2) Equities have an inherent tailwind, prices tend to drift higher.

Re: My trend following strategy and experience

Posted: Sun Oct 13, 2019 9:53 am
by Lee_WSP
Forester wrote:
Sun Oct 13, 2019 3:13 am
whodidntante wrote:
Sat Oct 12, 2019 11:39 pm
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Why does every managed futures fund seem to languish, then? Are all of them doing it wrong? Serious question.
1) Futures are a zero sum game, excess return must be "given" by the hedgers. There are more speculators competing to provide insurance to the commercial hedgers, and all participants have more information & computing power than was the case in the 1980s/90s
This is my position as well, however, the current influx of margin hungry posters has me questioning the basic assumption of absolute zero sum. If we are able to take a futures position with a small down payment, would there not be excess returns & losses from the synthetic leveraged position?

Re: My trend following strategy and experience

Posted: Sun Oct 13, 2019 11:26 am
by BlueEars
My trend following method is not the same as the OP's but has some similarities. I looked at the affect of unemployment data on the sell signal months and even with a month or two earlier warning as might be the case using real time data, the results would have been very similar if not identical! Perhaps this is also the case for Will's method?

So I now think the issue of real time data versus seasonally adjusted going far back in simulation time is not a problem ... at least for my methodology.

Re: My trend following strategy and experience

Posted: Sun Oct 13, 2019 11:49 am
by whodidntante
Forester wrote:
Sun Oct 13, 2019 3:13 am
whodidntante wrote:
Sat Oct 12, 2019 11:39 pm
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Why does every managed futures fund seem to languish, then? Are all of them doing it wrong? Serious question.
1) Futures are a zero sum game, excess return must be "given" by the hedgers. There are more speculators competing to provide insurance to the commercial hedgers, and all participants have more information & computing power than was the case in the 1980s/90s

2) Equities have an inherent tailwind, prices tend to drift higher.
I guess you're arguing that certain futures contracts are in contango. I agree. That is a valid argument for why managed futures strategies would struggle to profit from their long positions. However, not all contracts are in contango, and not all managed futures funds are limited to long positions. It's easy for a professional to see that a contract is in contango, and the manager could simply avoid long positions in such contracts.

As far as I know, trend following has not ever required much computing power. I can compute all of the buy/sell signals that I've seen described publicly in a computable way on my smartphone. It has enough memory and computing power. Are you saying that the information that others have and computing power of others have broken the validity of buy/signal signals from trend-following models?

Also, while it is true that futures trading is a zero-sum game, that does not mean that futures cannot capture the price movements of the underlying asset.

So I'm curious why the managed futures funds continue to languish if trend following works across countries, time, and asset classes. Have the markets been altered in a way that breaks the trend-following models? If so, which markets? I would personally like it to be clear that the strategy works. It would be a nice, market neutral return.

Re: My trend following strategy and experience

Posted: Sun Oct 13, 2019 5:24 pm
by hdas
whodidntante wrote:
Sun Oct 13, 2019 11:49 am
So I'm curious why the managed futures funds continue to languish if trend following works across countries, time, and asset classes. Have the markets been altered in a way that breaks the trend-following models? If so, which markets? I would personally like it to be clear that the strategy works. It would be a nice, market neutral return.
Naive strategies don’t work anymore. MF is like everything, top 5% do very well. MF need consistent long trends. See how they actually made some money this year in treasuries. With some exceptions the trend following community is very naive and still ridding on the backtests of the 70’s and 80’s. Cheers :greedy

Re: My trend following strategy and experience

Posted: Mon Oct 14, 2019 12:44 am
by Forester
whodidntante wrote:
Sun Oct 13, 2019 11:49 am
Forester wrote:
Sun Oct 13, 2019 3:13 am
whodidntante wrote:
Sat Oct 12, 2019 11:39 pm
willthrill81 wrote:
Wed Sep 11, 2019 9:44 am
Always passive wrote:
Wed Sep 11, 2019 2:28 am
Has anyone considered using low volatility funds/ETFs with trend following?
You certainly could. Trend following has been found to have favorable results across a wide range of asset classes, including stocks, bonds, commodities, etc. across time and geography.
Why does every managed futures fund seem to languish, then? Are all of them doing it wrong? Serious question.
1) Futures are a zero sum game, excess return must be "given" by the hedgers. There are more speculators competing to provide insurance to the commercial hedgers, and all participants have more information & computing power than was the case in the 1980s/90s

2) Equities have an inherent tailwind, prices tend to drift higher.
I guess you're arguing that certain futures contracts are in contango. I agree. That is a valid argument for why managed futures strategies would struggle to profit from their long positions. However, not all contracts are in contango, and not all managed futures funds are limited to long positions. It's easy for a professional to see that a contract is in contango, and the manager could simply avoid long positions in such contracts.

As far as I know, trend following has not ever required much computing power. I can compute all of the buy/sell signals that I've seen described publicly in a computable way on my smartphone. It has enough memory and computing power. Are you saying that the information that others have and computing power of others have broken the validity of buy/signal signals from trend-following models?

Also, while it is true that futures trading is a zero-sum game, that does not mean that futures cannot capture the price movements of the underlying asset.

So I'm curious why the managed futures funds continue to languish if trend following works across countries, time, and asset classes. Have the markets been altered in a way that breaks the trend-following models? If so, which markets? I would personally like it to be clear that the strategy works. It would be a nice, market neutral return.
The roll premium has vanished because there are so many noncommercial traders providing insurance to the hedgers today versus the 1980s. Just thinking logically, how does one generate a 10% annual return on Bitcoin, pork bellies or oil, all things being equal these assets should track inflation +- volatility. Trend following profits there is like trying to get blood out of a stone, versus holding the S&P 500 so long as the price is positive over a given period.

Re: My trend following strategy and experience

Posted: Mon Oct 14, 2019 11:37 am
by jayhawkerbeef
My strategy was just a simple 3mo dual momentum trading month end price, hate seeing/experiencing how terribly I’ve lagged the S&P over the last 4 years since I started.

Know that’s not long enough to follow any strategy. However, I did best the S&p in 2018, -1% to -4.5%. But like you I know I will hate drawdowns, and will not just sit and do nothing. And this year, S&P up ~20% and I’m 4%. Really really second guessing timing thing. Haha

Re: My trend following strategy and experience

Posted: Mon Oct 14, 2019 11:45 am
by BlueEars
jayhawkerbeef wrote:
Mon Oct 14, 2019 11:37 am
My strategy was just a simple 3mo dual momentum trading month end price, hate seeing/experiencing how terribly I’ve lagged the S&P over the last 4 years since I started.

Know that’s not long enough to follow any strategy. However, I did best the S&p in 2018, -1% to -4.5%. But like you I know I will hate drawdowns, and will not just sit and do nothing. And this year, S&P up ~20% and I’m 4%. Really really second guessing timing thing. Haha
I suspect your strategy is suffering because of the 3 month timing selection. I would imagine this is too short a period. How does 3 month work on a back test over a long time period? One period to look at would be the 1990's when few trend following methods beat buy-hold.