Before we look at some intraday 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 a „dumb“ edge exists in participating in economic growth, trading is a Zero Sum…
Category: investment strategies
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
Or why choosing the right time horizon is of essential importance for the validity of 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 our 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…
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…
Active versus Passive Investing or: do you have to beat the market for superior returns?
I think the active – passive discussion is moot. It is largely ideological with few useful results for the investor. There are two ways to think about the problem, that illustrate that. Argument number one: all investing involves active decisions. Passive investing is simply buying and holding an index ETF, you say? But which…
Is Trend Following a figment of the imagination?
Absolute momentum or time series momentum, as trends are called in academia, can be used to time virtually any price series (asset prices, composite indices, equity curves, factors and so on) in such a simple manner, that to be able to gain an advantage over the market that way, seems a bit suspect. Not to mention, that…
Volatility Strategies in Detail
Let´s put some meat on the bone and dig deeper into the practical details of the volatility strategies I use in my portfolio. These are among the most active, short term strategies I use at the moment. They also use concepts that are more off the beaten path, which makes them more valuable, but also…
Common Sense Backtesting
When looking at new strategies, I try to judge the quality of an idea by looking at it from different angles. A combination of methods estimates a range of possible outcomes that strategy could have and defines its place in the portfolio – one could call it common sense backtesting. Ideas first I always…
