Trading in ‘Real Time’ using the POTS method

2014-10-11

When I wrote the series of entries on ‘Calculating how much you need to launch your own Hedge Fund’ (http://yohf.net/2010/09/10/calculating-how-much-you-need-to-launch-your-own-hedge-fund-part-1/), I introduced the concept of a POTS Score (from a Portfolio Of Trading Strategies – (http://yohf.net/2010/11/15/calculating-how-much-you-need-to-launch-your-own-hedge-fund-part-4/)) as a way of selecting the Quantitative Trading strategies to trade based on current market state and limiting drawdown.  Through this series, it was evident that the more money you had under management in your fund, the higher the POTS score you could achieve.  Based on a few emails I have received recently, I think it would be worthwhile progressing a ‘real time’ example using the POTS method for various size funds.  As such, I intend running an extended monthly series, published after the fourth Friday of each month, doing just that.

Specifically, this series will:

  1. Run 3 small funds using the POTS method for an extended period
  2. Commence the smallest fund with $20,000 (the Is-Twenty-Plenty Fund), a second fund with $50,000 (the Nifty-Fifty Fund), and a larger fund with $250,000  (the Quarter Mill Thrill Fund).
  3. The Portfolio Of Trading Strategies used by each of these funds will be based on the same 16 Quantitative Trading models I have been running for over 5 years, all of which trade in leveraged financial products, and will be subject to the historic drawdown limitations published previously (and reproduced below).
  4. Each month, each fund will go through a rebalancing of the Quantitative Trading Strategies employed to run the fund, using the POTS method to complete this rebalancing.
  5. Each month, the Quantitative Trading Strategies selected for the upcoming month, and the amount to be invested per position, will be documented on this site.  The amount to be invested is the fully leveraged amount.
  6. Each month, the historic performance (based on backtesting) of the Portfolio Of Trading Strategies will be documented on this site.
  7. Each month, the Actual results achieved by each Quantitative Trading Strategy in the previous month shall be reported on this site.
  8. Each month, the net gain or loss, and the total funds under management, for each fund shall be reported on this site.
  9. The Actual results achieved will assume a 0.1% commission rate (slightly above the rate available through CFDs), will include carrying costs for trades made on margin, but will assume no slippage.
  10. The monthly rebalancing and reporting described above will be based on prices at Market Close on the fourth Friday of the month.

I will provide further information on the 16 Trading Strategies in the next few days, however, they do include strategies for trading:

  • long and short positions in equities (via CFDs) on the ASX200, Nasdaq, and S&P500
  • long and short positions in Commodity Futures
  • long and short positions in Foreign Exchange

for reference: Maximum Drawdown by fund Size used in determining Portfolio mix of Trading Strategies

 

 

 

 

 

 

 

Disclaimers:

  • *past performance is not an indicator of future performance.
  • the information contained on this website is not, and is not intended to be an offer of, or an invitation to purchase or subscribe for, financial products.