Wisdom State of Trend Following
Historical Report

Updated as of end October 2015

Wisdom State of Trend Following

 

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 Date End Date Total Return CAGR Max DD (TE) MAR Sharpe Longest DD
2000-01-01 2015-10-31 1,198.1% 16.99% 32.3% 0.53 0.55 45.8

LogEquityWithDD-Oct-15
 

Monthly and Yearly Performance


 
MonthlyReturnsGraph_P1
 

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
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%
2001 2.40% -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%
2003 8.31% 4.85% -8.38% 1.08% 3.29% -2.74% 1.54% 4.17% 3.27% 7.85% 0.18% -1.19% 23.20%
2004 2.11% 8.91% 4.07% -6.68% -2.83% -4.29% 3.19% -0.37% 3.42% 0.31% 10.20% -3.00% 14.52%
2005 1.03% 0.75% -3.59% -4.24% -0.67% 0.33% -0.89% 2.39% 6.14% -2.04% 6.57% 0.39% 5.72%
2006 8.46% -3.06% 5.14% 9.84% -1.44% -6.07% -3.25% 7.39% -0.07% 2.41% 7.11% -0.54% 27.34%
2007 0.90% -0.97% -0.12% 10.81% 9.25% 3.27% 1.46% -0.08% 10.03% 4.93% -0.53% 5.91% 53.84%
2008 10.68% 21.22% -7.23% -2.20% -0.98% 7.71% -11.96% 1.55% 13.83% 28.06% 11.29% 0.38% 88.99%
2009 2.61% 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%
2011 2.65% 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%
2013 3.15% -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%
2015 11.81% -3.96% 2.52% -2.56% -2.83% -3.90% 6.74% 1.81% 4.56% -9.19% 3.36%

 
MonthlyDistributionGraph_P1
 

Year Volatility Num Trades
2000 10.44% 1908
2001 13.85% 2094
2002 14.41% 1961
2003 13.95% 2091
2004 16.24% 2181
2005 14.1% 2360
2006 18.59% 2323
2007 18.73% 2265
2008 30.57% 2000
2009 13.35% 2286
2010 18.12% 2375
2011 19.98% 2646
2012 13.51% 2505
2013 14.29% 2632
2014 13.24% 2381
2015* 15.68% 2385
Average 16.19% 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 Ratio 0.53
RAR % 19.78%
R-Cubed 0.60
Robust Sharpe Ratio 1.04
Daily Return % 0.0656%
Daily Geometric Return % 0.043%
Daily Standard Deviation % 1.05%
Daily Downside Deviation % 1.09%
Daily Sharpe 0.055
Daily Geo Sharpe 0.033
Daily Sortino 0.053
Modified Sharpe Ratio 0.92
Annual Sharpe Ratio 0.55
Annual Sortino Ratio 0.53
Monthly Sharpe Ratio 0.22
Monthly Sortino Ratio 0.22
Calmar Ratio 0.57
R-Squared 0.921
Risk-free rate 3%
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 Million 2,187
Total Trades 36,393
Win/Loss Statistics
Wins 12,197 (33.5%)
Losses 24,196 (66.5%)
Winning Months 112 (58.9%)
Losing Months 78 (41.1%)
Average Win Percent 1.15%
Average Loss Percent 0.43%
Average Trade Percent 0.10%
Average Trade Duration 57.49
Profit Factor 1.24
Percent Profit Factor 1.34
 

 

Monte-Carlo Analysis


 
MonteCarloEquityGraph_P1
 

MonteCarloReturnGraph_P1
 

MonteCarloDrawdownGraph_P1
 

MonteCarloSharpeGraph_P1
 

Monte Carlo Confidence Level Statistics
90% Return 11.11%
90% Sharpe 0.02
90% MAR 0.32
90% R Squared 0.844
90% Maximum Drawdown 37.26%
90% Second Largest Drawdown 27.74%
90% Third Largest Drawdown 23.39%
90% Longest Drawdown 55.7
90% Second Longest Drawdown 29.8
90% Third Longest Drawdown 21.0

 

Portfolio and Instrument Performance

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

Currencies

Market Exchange Symbol
Brazilian Real CME BR5
Canadian Dollar CME CD
Euro / Japanese Yen CME RY
Korean Won KRX (Kofex) KRW
New Zealand Dollar CME NE
US Dollar Index CME DX2

Energies

Market Exchange Symbol
Brent Crude Oil ICE EUR (IPE) LCO
Gasoline (RBOB) NYMEX RB2
Kerosene TOCOM JK2
Light Sweet Crude Oil (WTI) E-mini NYMEX QM
Natural Gas (Henry Hub) E-mini NYMEX QG

Grains

Market Exchange Symbol
Corn CME (CBOT) C2
Crude Palm Oil BMD (MDEX) KPO
Milling Wheat EURONEXT (MATIF) BL2
Rice Rough CME (CBOT) RR2
Soybeans CME (CBOT) S2
Yellow Maize SAFEX MAY

Market Exchange Symbol
Copper CME (NYMEX) HG
Gold CME (COMEX) GC
Platinum CME (NYMEX) PL2
Silver CME (COMEX) SI2

Meats

Market Exchange Symbol
Cattle Feeder CME FC
Live Cattle CME LC

Equity Indices

Market Exchange Symbol
Dax index EUREX FDX
FTSE Xinhua China A50 index SGX A50
Hang Seng index mini HKEx HMH
Mini Russell 1000 index ICE US (NYFE) RM4
MSCI Singapore Stock index SGX SSG
TOPIX index TSE JTI

LTIR

Market Exchange Symbol
Canadian 10-Year Govt Bond MX CGB
Euro German Bund EUREX EBL
Japanese 10-Year Govt Bond SGX SJB
Swiss 10-Year Govt Bond EUREX CON
US T-Notes 5-Year CME (CBOT) FV

STIR

Market Exchange Symbol
90-Day NZ Bank Bills ASX (SFE-NZFE) NBB
Euribor 3-month EURONEXT (LIFFE) FEI

Softs

Market Exchange Symbol
Cocoa ICE US (NYBOT-CSCE) CC2
Coffee ICE US (NYBOT-CSCE) KC2
Milk (Class III) CME DA
Sugar (#11) ICE US (NYBOT-CSCE) SB2

Other

Market Exchange Symbol
Lumber CME LB
Rubber TOCOM JR2
 

Instrument Performance

Symbol  Wins  %  Losses  %  Trades  Win Months  %  Loss Months  %  Avg. Win  Avg. Loss  Avg. Trade  % Profit Factor
A50 87 33.7% 171 66.3% 258 152 80% 38 20% 1% 0.43% 0.05% 1.19
BL2 293 33.6% 578 66.4% 871 87 45.8% 103 54.2% 2.29% 0.78% 0.25% 1.49
BR5 249 43.5% 324 56.5% 573 120 63.2% 70 36.8% 1.99% 0.54% 0.56% 2.83
C2 290 30% 676 70% 966 77 40.5% 113 59.5% 0.92% 0.42% -0.02% 0.93
CC2 291 25.4% 854 74.6% 1145 66 34.7% 124 65.3% 0.6% 0.44% -0.17% 0.47
CD 298 30.6% 676 69.4% 974 73 38.4% 117 61.6% 0.92% 0.34% 0.04% 1.19
CGB 327 36.5% 568 63.5% 895 80 42.1% 110 57.9% 0.81% 0.37% 0.06% 1.26
CON 320 36.1% 566 63.9% 886 92 48.4% 98 51.6% 1.22% 0.47% 0.14% 1.48
DA 282 37% 481 63% 763 96 50.5% 94 49.5% 2.58% 0.44% 0.68% 3.46
DX2 325 35% 604 65% 929 84 44.2% 106 55.8% 1.08% 0.36% 0.14% 1.61
EBL 345 40.7% 502 59.3% 847 93 48.9% 97 51.1% 0.97% 0.36% 0.18% 1.84
FC 320 34.4% 610 65.6% 930 84 44.2% 106 55.8% 1.03% 0.41% 0.09% 1.34
FDX 350 37.2% 592 62.8% 942 82 43.2% 108 56.8% 0.79% 0.36% 0.06% 1.28
FEI 255 27.8% 663 72.2% 918 75 39.5% 115 60.5% 1.09% 0.48% -0.04% 0.88
FV 316 34.6% 597 65.4% 913 90 47.4% 100 52.6% 0.94% 0.36% 0.09% 1.39
GC 314 33.7% 618 66.3% 932 79 41.6% 111 58.4% 1.03% 0.45% 0.05% 1.17
HG 319 33.5% 632 66.5% 951 75 39.5% 115 60.5% 1.48% 0.47% 0.18% 1.59
HMH 321 34.4% 611 65.6% 932 76 40% 114 60% 0.82% 0.41% 0.01% 1.05
JK2 109 30.1% 253 69.9% 362 144 75.8% 46 24.2% 1.2% 0.4% 0.08% 1.3
JR2 316 36.1% 560 63.9% 876 82 43.2% 108 56.8% 0.99% 0.48% 0.05% 1.15
JTI 270 34.5% 513 65.5% 783 94 49.5% 96 50.5% 1.35% 0.41% 0.2% 1.74
KC2 295 30.2% 681 69.8% 976 78 41.1% 112 58.9% 0.78% 0.4% -0.05% 0.84
KPO 295 35.2% 542 64.8% 837 80 42.1% 110 57.9% 1.51% 0.46% 0.24% 1.8
KRW 240 27.3% 640 72.7% 880 72 37.9% 118 62.1% 1.54% 0.59% -0.01% 0.98
LB 344 35.9% 614 64.1% 958 82 43.2% 108 56.8% 0.79% 0.44% 0% 1
LC 270 27.1% 727 72.9% 997 73 38.4% 117 61.6% 0.9% 0.4% -0.05% 0.83
LCO 335 36.6% 580 63.4% 915 91 47.9% 99 52.1% 1.03% 0.37% 0.14% 1.61
MAY 329 42% 454 58% 783 101 53.2% 89 46.8% 1.63% 0.4% 0.45% 2.92
NBB 230 28.6% 573 71.4% 803 88 46.3% 102 53.7% 2.71% 0.64% 0.32% 1.7
NE 317 35.9% 566 64.1% 883 88 46.3% 102 53.7% 1.31% 0.43% 0.19% 1.69
PL2 304 33.5% 604 66.5% 908 84 44.2% 106 55.8% 1.18% 0.37% 0.15% 1.6
QG 239 29.4% 573 70.6% 812 95 50% 95 50% 0.91% 0.43% -0.04% 0.88
QM 266 33.4% 531 66.6% 797 102 53.7% 88 46.3% 0.99% 0.38% 0.07% 1.29
RB2 321 33.9% 626 66.1% 947 80 42.1% 110 57.9% 0.88% 0.38% 0.05% 1.2
RM4 287 34.5% 545 65.5% 832 103 54.2% 87 45.8% 0.86% 0.41% 0.03% 1.1
RR2 290 29.4% 696 70.6% 986 74 38.9% 116 61.1% 0.95% 0.44% -0.03% 0.9
RY 304 35.8% 546 64.2% 850 82 43.2% 108 56.8% 1.01% 0.41% 0.1% 1.37
S2 326 34% 633 66% 959 82 43.2% 108 56.8% 0.99% 0.36% 0.1% 1.41
SB2 312 33.1% 630 66.9% 942 81 42.6% 109 57.4% 1.02% 0.42% 0.06% 1.2
SI2 291 31.2% 643 68.8% 934 80 42.1% 110 57.9% 0.99% 0.35% 0.07% 1.28
SJB 300 34.1% 579 65.9% 879 95 50% 95 50% 0.79% 0.42% -0.01% 0.97
SSG 305 35.1% 564 64.9% 869 84 44.2% 106 55.8% 0.96% 0.41% 0.07% 1.28
Averages 290 33.7% 576 66.3% 867 88 46.3% 102 53.7% 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.

Color Component System used Trading Horizon Parameters Pos. Size
BBB-S Bollinger Band Breakout Short-term 20,2 0.483
BBB-M Bollinger Band Breakout Medium-term 50,2 0.63
BBB-L Bollinger Band Breakout Long-term 200,2 1
DMA-S Dual Moving Average Short-term 20,10 0.17
DMA-M Dual Moving Average Medium-term 50,20 0.17
DMA-L Dual Moving Average Long-term 200,50 0.19
DON-S Donchian Breakout Short-term 20 0.44
DON-M Donchian Breakout Medium-term 50 0.58
DON-L Donchian Breakout Long-term 200 0.85
TMA-S Triple Moving Average Short-term 50,20,10 0.41
TMA-M Triple Moving Average Medium-term 200,50,20 0.59
TMA-L Triple Moving Average Long-term 800,200,50 0.93

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

 

System last month
TMA-M 123.27%
DMA-L 117.58%
BBB-M 113.32%
TMA-L 110.52%
TMA-S 97.68%
DON-L 96.32%
DON-M 90.21%
BBB-L 76.07%
DMA-M 71.79%
DON-S 53.34%
DMA-S 46.87%
BBB-S 35.82%
Index 1032.79%
Historical Sys Attribution
 

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

RMultipleDistributionGraph_S4_P1
RMultipleContributionGraph_S4_P1
 

RMultipleDistributionGraph_S3_P1
RMultipleContributionGraph_S3_P1
 

RMultipleDistributionGraph_S2_P1
RMultipleContributionGraph_S2_P1
 

RMultipleDistributionGraph_S10_P1
RMultipleContributionGraph_S10_P1
 

RMultipleDistributionGraph_S9_P1
RMultipleContributionGraph_S9_P1
 

RMultipleDistributionGraph_S8_P1
RMultipleContributionGraph_S8_P1
 

RMultipleDistributionGraph_S13_P1
RMultipleContributionGraph_S13_P1
 

RMultipleDistributionGraph_S12_P1
RMultipleContributionGraph_S12_P1
 

RMultipleDistributionGraph_S11_P1
RMultipleContributionGraph_S11_P1
 

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

Slippage 5% of ATR
Min. slippage $15.00
Commisions $20 per contract
Slippage on rolls Yes
Roll slippage 5% of ATR
Earn interest Yes
 

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.