Trading Performance September 2018

Trading Performance September 2018 

After a very disheartening trading performance in August 2018, September 2018 gave stupendous returns. This was due to an extremely sharp fall in the Bank Nifty, and an extremely sharp rise in bond yields. This behavior is not unexpected, but the correlation of bond yields and the Bank Nifty does lead some degree of correlation, which is not what was expected while diversifying to a new instrument. 

Unfortunately, I stopped trading commodities a few months ago, and I also reduced the position size on bond futures. The commodities was a conscious choice, because I wanted to refine my strategies and also see if existing strategies did have an ‘edge’. The bond futures position size reduction was a ‘fear’ thing. 

Nevertheless, the nice returns on the bank nifty in September were a nice bonus. It also meant that I have positive 1 year returns. And of course, since the inception of measurement, i.e., November 2016, it means a return of almost 200%.

As of now, there are 3 operating trading segments:

a) Trend Following on the Bank Nifty, which constitutes nearly 70% of the total position. This is on various time frames, with shorter time frames having 50% of the positions, and daily time frame having 50% of the position

b) Trend Following on Yields, to trade on bond futures

c) Mean Reversion Systems on individual stock futures

Currently, momentum trading on commodities is in suspension. Also, I very occassionally do options plays. In the beginning of October, I have also started trend following in individual stocks(taking delivery).

Portfolio Returns
Investment and Trading Performance Compared with Various Benchmarks

Great Articles on Momentum and Trend Following

Great Articles on Momentum and Trend Following

This is a great article on the history and academic foundations on momentum and trend following. It gives a great explanation from behavioral science as well as information theory for why momentum works in markets.. Furthermore, it also integrates momentum and trend following, and explains why both are two sides of the same coin. The article is well grounded academically. A great read:

Two Centuries of Momentum