Has 2018 actually been one of the most difficult trading environments one can encounter? Of course a 50% equity decline in a severe bear market, as we saw in 2000 or 2008, for example, looks much worse on paper, but a broadly diversified portfolio did not do nearly as bad. A substantial allocation to treasury bonds…
Category: investment strategies
Short Option Overlay for Trend Positions
One of the most frustrating things about a long- and medium-term trend strategy (including the super long-term trend following idea of buy-and-hold) is that prices seem to spend most of the time going nowhere and often retrace to give back a portion of those nice book profits. „The (buy-and-hold) investor only spends about 22% of…
Dead Simple – The Opening Gap and other Intraday Patterns around the Market Opening
Before we look at some intraday trading strategies in detail, I have to admit I’m biased. I don’t believe in day-trading for several reasons: No basic edge: studies point to merely 5% of day-traders being consistently profitable. In contrast to long-term investing, where an unskilled advantage exists for everyone by participating in economic growth, trading…
A Barbell Portfolio Strategy
with a realtime review of portfolio performance during the recent market pullback. I want to take a look at some of my core portfolio strategies from a fresh angle. The basic principles discussed are easily transferable to other types of portfolios. A key portfolio feature, I strive for, is an adaptive combination of strategies with…
Your Entry may be less important than you think
Choosing the right time horizon is of essential importance to find a viable edge for a trading strategy. Many short-term traders tend to show an unhealthy obsession trying to optimize trade entries. Long-term investors, on the other hand, often enter in an arbitrary fashion and could improve results by using broad entry criteria. My theory…
Trend Following for Individual Investors – A Manageable Futures Strategy
A traditional long-only portfolio consisting of globally diversified asset classes can be greatly enhanced by a truly diversifying strategy, namely trend-following managed futures. We have over 40 years of real return data *,*** available from different CTAs running such strategies – there is even research testing the validity of the concept going back 800 years in…
Short Volatility Strategies and their similarity to an Insurance Company´s Business
An often used analogy likens volatility sellers to insurers of catastrophic risk. Is that analogy actually any good or can the case for significant differences be made and be used as an advantage? A short volatility strategy can be implemented by selling options or through volatility products directly. Similarities to the insurance business can already…
Volatility ETF Trading Strategy – A Case Study of Recent Volatility Spikes
When VIX traded at all time lows in July 2017 volatility became a subject that was hard to avoid even in the mainstream media. Systematically trading volatility ETP and their options has evolved to be a cornerstone of my portfolio allocation. It is the most short term and most aggressive strategy in my portfolio – based…
Working with different Market Regimes Part II
Based on a refined, trustworthy investment philosophy, I return to the practical implementation of a key question: How is successfully adapting an asset allocation to market conditions possible and can it yield higher risk-adjusted returns than a static portfolio? I concentrate on the third basic building block of my investment philosophy – systematic downside protection through dynamic asset…
Working with different Market Regimes Part I: Building an Investment Philosophy
My last post concluded with the remark: „actively adapting asset allocation to address changing market conditions is the best practical method in the real world.“ This conclusion stems from analyzing the behavior gap evident in the Dalbar study, which leaves the average fund investor with only about 50% of the returns of a passive index…
