SI48: The state of the Bond market and do Institutions affect CTA performance

Aug 10, 2019

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This week, we discuss the current state of the Bond market, how the larger, commercial institutions affect overall CTA Trend Following performance, how to deal with the fluctuations in currencies when performing backtests, and we also give our thoughts on various Trading exit strategies. Questions answered this week include: does the majority of CTAs get out of their equity positions when the S&P500 falls below its 200-day moving average? Should you avoid trading markets that perform badly in backtests? Can a system that is working too perfectly be a bad sign? What are the implications for trading every market in the same way? What is the benchmark Sharpe Ratio for Trend Following strategies? Is there a limit to portfolio diversification?

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Episode TimeStamps:

00:00 – Intro

01:45 – Macro recap from Niels

03:25 – Weekly review of performance

12:20 – Top tweets

34:40 – Question 1, Sam: What is the benchmark TF Sharpe ratio?

43:00 – Question 2, Sam: Can there be too much diversification?

53:15 – Question 3, Walter: Please discuss how you deal with foreign currency denominated futures.

58:10 – Question 4, Walter: Since most stocks don’t beat the index or T-bills, shouldn’t shorting be easy (versus the conventional wisdom shorting is hard)?

01:03:00 – Questions 5 & 6, Jeff: What are the risks of using larger (vs smaller) ATR multiples for exits? What kind of exits does DUNN use?

01:08:40 – Benchmark performance update

01:09:40 – Live event update 10/26/19-10/27/19

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