Methodology
A trading system attempts to exploit a certain recurring pattern in
price behavior. TRANSTREND's trading systems are looking for
various kinds of trending behavior in both outright markets, spreads
and ratios. The goal is an optimal exploitation of available
opportunities under severe restrictions on tolerated risk. Note
that in an absolute return strategy, investment decisions are not
dictated by a benchmark. Consequently, all market risk is active,
which means controllable and avoidable. TRANSTREND's favored
instrument is diversification.
Robustness
TRANSTREND considers a high degree of robustness to be essential.
With regard to the design process of trading systems, this has led
to three fundamental principles:
- The same systems are used across all relevant markets.
- The same parameter settings are used across all markets.
- A small variation in any parameter should not have a large
impact on the results of a system.
These principles limit the risk of curve fitting and over
optimization; in other words, maximize the chance that historical
results can be repeated.
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Price Input
Being technical in nature, TRANSTREND's trading systems are fed
with the daily prices of the markets traded (outright or spreads
and ratios). To derive accurate series of daily prices, TRANSTREND
gathers and filters tickdata for all markets in the portfolio.
Systematic
TRANSTREND's trading systems are not models. They do not attempt to
forecast fair values or equilibrium price levels, and they are not
based on an economic theory that risks becoming out-dated. Systems
are dynamic and reactive by nature, they respond to changes in a
consistent way.
Evolution
Even though trading systems are responsive by nature, TRANSTREND's
track record is the result of a continuous process of updating and
improving its programs. These updates include adding and deleting
markets and trading rules. Changes are the result of extensive
in-house research and must agree with the style of the program:
Global Diversified Medium Term Trendfollowing.
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