Wisdom State of Trend Following
Historical Report

Updated as of end October 2015



 

The Wisdom State of Trend Following report was built to reflect and track the generic performance of trend following as a trading strategy. We developed a system suite made up of classic trend following systems, available in the public domain (details of systems further below) to produce a trend following benchmark.

This system was back-tested over multiple timeframes with a portfolio of futures selected from the range of 300+ futures markets over 30+ exchanges that we can provide our clients access to. The portfolio is global, diversified and balanced over the main sectors (portfolio composition available further below).

The back-test simulation results were presented below, covering the period preceding the public launch of the Wisdom State of Trend Following report (September 2013), to add historical context to the live report. This has now been updated as of end October 2015.

This also serves as verification that the the report and its index is relevant to acting as a trend following benchmark as the simulated performance over the last decade matches that experienced in live trading over the same period. The live report is tracked and run forward using the same parameters and portfolio as those used for the back-test validation.

The simulation is run using Trading Blox, which allows system traders to back-test and trade their own systems, as well as delegate their trading execution to Wisdom Trading.

The report is broken down in the following sections:

 

Main Performance Results


 

Start DateEnd DateTotal ReturnCAGRMax DD (TE)MARSharpeLongest DD
2000-01-012015-10-311,198.1%16.99%32.3%0.530.5545.8


 

Monthly and Yearly Performance


 

 

JanFebMarAprMayJunJulAugSepOctNovDecYear
2000-2.22%-0.36%-5.26%-2.45%3.51%-1.57%6.78%2.79%-2.42%3.18%4.08%5.48%11.30%
20012.40%-0.34%7.68%-4.21%0.93%-7.26%3.53%1.86%6.19%1.29%-5.12%-0.13%5.91%
2002-4.15%0.06%3.89%-0.92%10.58%5.94%1.38%3.36%7.64%-5.06%0.13%10.56%37.08%
20038.31%4.85%-8.38%1.08%3.29%-2.74%1.54%4.17%3.27%7.85%0.18%-1.19%23.20%
20042.11%8.91%4.07%-6.68%-2.83%-4.29%3.19%-0.37%3.42%0.31%10.20%-3.00%14.52%
20051.03%0.75%-3.59%-4.24%-0.67%0.33%-0.89%2.39%6.14%-2.04%6.57%0.39%5.72%
20068.46%-3.06%5.14%9.84%-1.44%-6.07%-3.25%7.39%-0.07%2.41%7.11%-0.54%27.34%
20070.90%-0.97%-0.12%10.81%9.25%3.27%1.46%-0.08%10.03%4.93%-0.53%5.91%53.84%
200810.68%21.22%-7.23%-2.20%-0.98%7.71%-11.96%1.55%13.83%28.06%11.29%0.38%88.99%
20092.61%0.71%-6.82%-0.81%3.76%-3.77%1.40%1.31%-0.29%-5.44%7.14%-5.84%-6.82%
2010-3.67%-1.90%3.86%0.50%-3.00%0.70%0.92%6.64%2.86%6.99%-2.74%12.10%24.43%
20112.65%4.42%-4.87%7.11%-11.57%-5.18%3.39%3.40%3.89%-11.60%1.25%1.11%-7.95%
2012-3.03%3.27%-2.99%-1.18%11.19%-8.56%8.11%-0.84%-0.89%-3.41%-2.35%-0.44%-2.62%
20133.15%-2.69%-1.07%3.15%-3.33%2.84%-6.75%-4.02%-3.84%0.12%1.82%0.07%-10.60%
2014-2.45%0.24%-2.23%1.01%0.98%4.31%3.83%2.85%8.07%-0.10%11.26%7.14%39.81%
201511.81%-3.96%2.52%-2.56%-2.83%-3.90%6.74%1.81%4.56%-9.19%3.36%

 

 

YearVolatilityNum Trades
200010.44%1908
200113.85%2094
200214.41%1961
200313.95%2091
200416.24%2181
200514.1%2360
200618.59%2323
200718.73%2265
200830.57%2000
200913.35%2286
201018.12%2375
201119.98%2646
201213.51%2505
201314.29%2632
201413.24%2381
2015*15.68%2385
Average16.19%2275

*Results for 2015 include all trading from January to October.
Volatility is calculated as annualized standard deviation of daily returns.

 

Additional Performance Stats


 

Performance Indices
CAGR %16.99%
MAR Ratio0.53
RAR %19.78%
R-Cubed0.60
Robust Sharpe Ratio1.04
Daily Return %0.0656%
Daily Geometric Return %0.043%
Daily Standard Deviation %1.05%
Daily Downside Deviation %1.09%
Daily Sharpe0.055
Daily Geo Sharpe0.033
Daily Sortino0.053
Modified Sharpe Ratio0.92
Annual Sharpe Ratio0.55
Annual Sortino Ratio0.53
Monthly Sharpe Ratio0.22
Monthly Sortino Ratio0.22
Calmar Ratio0.57
R-Squared0.921
Risk-free rate3%
Drawdowns and Trades
Maximum Total Equity Drawdown %32.26%
Longest Total Equity Drawdown (months)45.77
Average Max TE Drawdown %20.89%
Average Max TE Drawdown Length (months)18.82
Maximum Monthly Total Equity Drawdown %29.84%
Maximum Monthly Closed Equity Drawdown %23.83%
Maximum Closed Equity Drawdown %27.56%
Average Closed Equity Drawdown %1.94%
Round Turns Per Million2,187
Total Trades36,393
Win/Loss Statistics
Wins12,197 (33.5%)
Losses24,196 (66.5%)
Winning Months112 (58.9%)
Losing Months78 (41.1%)
Average Win Percent1.15%
Average Loss Percent0.43%
Average Trade Percent0.10%
Average Trade Duration57.49
Profit Factor1.24
Percent Profit Factor1.34
 

 

Monte-Carlo Analysis


 

 


 


 


 

Monte Carlo Confidence Level Statistics
90% Return11.11%
90% Sharpe0.02
90% MAR0.32
90% R Squared0.844
90% Maximum Drawdown37.26%
90% Second Largest Drawdown27.74%
90% Third Largest Drawdown23.39%
90% Longest Drawdown55.7
90% Second Longest Drawdown29.8
90% Third Longest Drawdown21.0

 

Portfolio and Instrument Performance

The portfolio selected for the index represents a diversified mix of global futures balanced across all sectors:

Currencies

MarketExchangeSymbol
Brazilian RealCMEBR5
Canadian DollarCMECD
Euro / Japanese YenCMERY
Korean WonKRX (Kofex)KRW
New Zealand DollarCMENE
US Dollar IndexCMEDX2

Energies

MarketExchangeSymbol
Brent Crude OilICE EUR (IPE)LCO
Gasoline (RBOB)NYMEXRB2
KeroseneTOCOMJK2
Light Sweet Crude Oil (WTI) E-miniNYMEXQM
Natural Gas (Henry Hub) E-miniNYMEXQG

Grains

MarketExchangeSymbol
CornCME (CBOT)C2
Crude Palm OilBMD (MDEX)KPO
Milling WheatEURONEXT (MATIF)BL2
Rice RoughCME (CBOT)RR2
SoybeansCME (CBOT)S2
Yellow MaizeSAFEXMAY

MarketExchangeSymbol
CopperCME (NYMEX)HG
GoldCME (COMEX)GC
PlatinumCME (NYMEX)PL2
SilverCME (COMEX)SI2

Meats

MarketExchangeSymbol
Cattle FeederCMEFC
Live CattleCMELC

Equity Indices

MarketExchangeSymbol
Dax indexEUREXFDX
FTSE Xinhua China A50 indexSGXA50
Hang Seng index miniHKExHMH
Mini Russell 1000 indexICE US (NYFE)RM4
MSCI Singapore Stock indexSGXSSG
TOPIX indexTSEJTI

LTIR

MarketExchangeSymbol
Canadian 10-Year Govt BondMXCGB
Euro German BundEUREXEBL
Japanese 10-Year Govt BondSGXSJB
Swiss 10-Year Govt BondEUREXCON
US T-Notes 5-YearCME (CBOT)FV

STIR

MarketExchangeSymbol
90-Day NZ Bank BillsASX (SFE-NZFE)NBB
Euribor 3-monthEURONEXT (LIFFE)FEI

Softs

MarketExchangeSymbol
CocoaICE US (NYBOT-CSCE)CC2
CoffeeICE US (NYBOT-CSCE)KC2
Milk (Class III)CMEDA
Sugar (#11)ICE US (NYBOT-CSCE)SB2

Other

MarketExchangeSymbol
LumberCMELB
RubberTOCOMJR2
 

Instrument Performance

Symbol Wins % Losses % Trades Win Months % Loss Months % Avg. Win Avg. Loss Avg. Trade % Profit Factor
A508733.7%17166.3%25815280%3820%1%0.43%0.05%1.19
BL229333.6%57866.4%8718745.8%10354.2%2.29%0.78%0.25%1.49
BR524943.5%32456.5%57312063.2%7036.8%1.99%0.54%0.56%2.83
C229030%67670%9667740.5%11359.5%0.92%0.42%-0.02%0.93
CC229125.4%85474.6%11456634.7%12465.3%0.6%0.44%-0.17%0.47
CD29830.6%67669.4%9747338.4%11761.6%0.92%0.34%0.04%1.19
CGB32736.5%56863.5%8958042.1%11057.9%0.81%0.37%0.06%1.26
CON32036.1%56663.9%8869248.4%9851.6%1.22%0.47%0.14%1.48
DA28237%48163%7639650.5%9449.5%2.58%0.44%0.68%3.46
DX232535%60465%9298444.2%10655.8%1.08%0.36%0.14%1.61
EBL34540.7%50259.3%8479348.9%9751.1%0.97%0.36%0.18%1.84
FC32034.4%61065.6%9308444.2%10655.8%1.03%0.41%0.09%1.34
FDX35037.2%59262.8%9428243.2%10856.8%0.79%0.36%0.06%1.28
FEI25527.8%66372.2%9187539.5%11560.5%1.09%0.48%-0.04%0.88
FV31634.6%59765.4%9139047.4%10052.6%0.94%0.36%0.09%1.39
GC31433.7%61866.3%9327941.6%11158.4%1.03%0.45%0.05%1.17
HG31933.5%63266.5%9517539.5%11560.5%1.48%0.47%0.18%1.59
HMH32134.4%61165.6%9327640%11460%0.82%0.41%0.01%1.05
JK210930.1%25369.9%36214475.8%4624.2%1.2%0.4%0.08%1.3
JR231636.1%56063.9%8768243.2%10856.8%0.99%0.48%0.05%1.15
JTI27034.5%51365.5%7839449.5%9650.5%1.35%0.41%0.2%1.74
KC229530.2%68169.8%9767841.1%11258.9%0.78%0.4%-0.05%0.84
KPO29535.2%54264.8%8378042.1%11057.9%1.51%0.46%0.24%1.8
KRW24027.3%64072.7%8807237.9%11862.1%1.54%0.59%-0.01%0.98
LB34435.9%61464.1%9588243.2%10856.8%0.79%0.44%0%1
LC27027.1%72772.9%9977338.4%11761.6%0.9%0.4%-0.05%0.83
LCO33536.6%58063.4%9159147.9%9952.1%1.03%0.37%0.14%1.61
MAY32942%45458%78310153.2%8946.8%1.63%0.4%0.45%2.92
NBB23028.6%57371.4%8038846.3%10253.7%2.71%0.64%0.32%1.7
NE31735.9%56664.1%8838846.3%10253.7%1.31%0.43%0.19%1.69
PL230433.5%60466.5%9088444.2%10655.8%1.18%0.37%0.15%1.6
QG23929.4%57370.6%8129550%9550%0.91%0.43%-0.04%0.88
QM26633.4%53166.6%79710253.7%8846.3%0.99%0.38%0.07%1.29
RB232133.9%62666.1%9478042.1%11057.9%0.88%0.38%0.05%1.2
RM428734.5%54565.5%83210354.2%8745.8%0.86%0.41%0.03%1.1
RR229029.4%69670.6%9867438.9%11661.1%0.95%0.44%-0.03%0.9
RY30435.8%54664.2%8508243.2%10856.8%1.01%0.41%0.1%1.37
S232634%63366%9598243.2%10856.8%0.99%0.36%0.1%1.41
SB231233.1%63066.9%9428142.6%10957.4%1.02%0.42%0.06%1.2
SI229131.2%64368.8%9348042.1%11057.9%0.99%0.35%0.07%1.28
SJB30034.1%57965.9%8799550%9550%0.79%0.42%-0.01%0.97
SSG30535.1%56464.9%8698444.2%10655.8%0.96%0.41%0.07%1.28
Averages29033.7%57666.3%8678846.3%10253.7%1.2%0.4%0.1%1.39
 Wins % Losses % Trades Win Months % Loss Months % Avg. Win Avg. Loss Avg. Trade % Profit Factor

 

Individual Systems Analysis

Systems Used

One of the main goals of the index is to mirror the performance of trend following in general. As such, the trading strategy is based on simple, public trading systems that use trend following principles. Each system is declined in three different timeframes (long, medium and short) to cover a wide spectrum of trend duration and increase overall diversification.

ColorComponentSystem usedTrading HorizonParametersPos. Size
BBB-SBollinger Band BreakoutShort-term20,20.483
BBB-MBollinger Band BreakoutMedium-term50,20.63
BBB-LBollinger Band BreakoutLong-term200,21
DMA-SDual Moving AverageShort-term20,100.17
DMA-MDual Moving AverageMedium-term50,200.17
DMA-LDual Moving AverageLong-term200,500.19
DON-SDonchian BreakoutShort-term200.44
DON-MDonchian BreakoutMedium-term500.58
DON-LDonchian BreakoutLong-term2000.85
TMA-STriple Moving AverageShort-term50,20,100.41
TMA-MTriple Moving AverageMedium-term200,50,200.59
TMA-LTriple Moving AverageLong-term800,200,500.93

Please note the colour-coding to assist reading the contribution charts below:

  • one “color hue” per system (e.g. blue for “BBB” system)
  • one “shade” per time horizon (e.g. dark for “L” – Long-term system)

The money management aspect of the overall system very simply allocates a fixed percentage of equity to each new position’s calculated risk (based on volatility). Each system is set up with a different percent of equity in order to calibrate (or normalize) the volatility of each system. The calibration was performed by assigning a position sizing percent to normalize the standard deviation of each system’s result stream on the period 2000-2010 (normalization period). The period from 2010-2013 was used for validation.

 

Individual System Contribution

 

Systemlast month
TMA-M123.27%
DMA-L117.58%
BBB-M113.32%
TMA-L110.52%
TMA-S97.68%
DON-L96.32%
DON-M90.21%
BBB-L76.07%
DMA-M71.79%
DON-S53.34%
DMA-S46.87%
BBB-S35.82%
Index1032.79%

 

Please note that the Index full return calculated here (1,032.79%) is different from the headline total return (1,198.1%), as earned interest is not taken into account in the performance attribution calculations above.

 

Individual System Trade Analysis



 



 



 



 



 



 



 



 



 

Index Methodology

The index performance is simulated using Trading Blox and CSI data (back-adjusted contracts rolling on Open Interest). The performance of the index is directly derived from the performance of a Trading Blox simulation suite composed of each system component as a system part of that suite.

The simulation uses realistic trading friction parameters (slippage, commissions, interest as detailed aside).

The individual system performance attributions are directly extracted from the same simulation run.

Trade Friction parameters

Slippage5% of ATR
Min. slippage$15.00
Commisions$20 per contract
Slippage on rollsYes
Roll slippage5% of ATR
Earn interestYes
 

Material Assumptions

The test is set-up with an arbitrary starting capital of 1B, starting in 2000. As the test is intended to represent an hypothetical index, no liquidity/volume constraints are enforced, making the results less dependent on actual simulation capital.
Profits are compounded (assumed to be reinvested).
The purchase or sale price for each trade that generated the hypothetical results is based either on 1) open price, the day after the Buy or Sell signal for the Moving Average-based systems or 2) stop level set by the relevant indicator for the Bollinger or Donchian systems. The actual simulated fill price is obtained by calculating a slippage factor, which is added to (or subtracted from) the theoretical entry price. For a long entry, the slippage factor is calculated by measuring the range from the theoretical entry price to the day’s highest price, and multiplying that amount by the Slippage Percent. (For short
entries, the slippage factor is calculated by measuring the range from the theoretical entry price to the low). The slippage factor is then added to, or subtracted from the theoretical entry price, to obtain the simulated fill price.

Disclaimers

Risk Disclosures

Commodity Trading involves high risks and you can lose a significant amount of money. Commodity trading is not suitable for many investors. Any performance results listed in all marketing materials represents simulated computer results over past historical data, and not the results of an actual account. All opinions expressed anywhere on this website are only opinions of the author. The information contained here was gathered from sources deemed reliable, however, no claim is made as to its accuracy or content. Different testing platforms can produce slightly different results. Our systems are only recommended for well capitalized and experienced futures traders.

CFTC-required risk disclosure for hypothetical results

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.

One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.