Welcome to VXF Market Signal

C2
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Welcome to VXF Market Signal

I am rather new member to the C2 community.

I am 43 and have been trading for 20 years. I used to run global markets structuring for large international investment banks for Asia, Middle East and Africa. My main area of focus has always been structured solutions in the credit, rates, commodity and equity derivatives space.

I have retired 3 years ago as I decided to take a break from investment banking and run my own money on my own terms.

I have developed several investment strategies for my own portfolios with the goal to preserve my retirement capital, limit drawdowns and outperform a buy-and-hold SPX strategy. Other strategies include a global macro positioning algo and a swing trading range technique which I will publish on C2 at a later stage.

My go-to strategy is the VXF Market Signal.

The VXF Market Signal is a strategy based on a tried and tested mathematical model using part of the VIX Futures term structure. The rate of change of the shape of the term structure recorded on different time frames determines levels and triggers to get “in” or “out” of the SPY and “in” or “out” of long duration US treasuries.

The model relies on the robustness of the mathematical model back-tested (and tested in practice) and the simplicity of the signals and the underlyings to be traded. This is not a fancy-pansy positioning or esoteric instrument-based strategy. At all time you are all-in one or the other asset. This is not a day-trading tool either although signals can change at a rapid pace during high volatility regimes. It also works for all portfolio sizes.

The model generates a signal once a day 1h before the close (or 10 min before when it is too close to call) to buy/hold SPY or sell SPY and buy EDV/TLT.

The algorithm has been backtested against the market itself since 1/1/2008 as well as all major SPY drawdowns (10%+) and other out-of-sample data sets. I am proud to report a 34.2% avg annual return (compounded) and Sharpe of 1.9 and a Sortino of 3.09 since 1/1/2008. Particularly the portfolio returned 36.88% in 2008, 49% in 2011, 17.88% in 2018, and 48.42% YTD.

From 1/1/2008 to today, historical VAR95 and VAR99 stand at -1.35% and -2.62% respectively while CVAR95 and CVAR99 for the period stand at -2.13% and -3.55%.

If this is of interest to you, I’d be happy to share with you (for free) my signals.

I am also open to questions if you want to know more.

Thanks

Alain

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Welcome to C2.
Here is the strategy link:

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Welcome, I very much like the mathematical background and backtesting process of it (that’s how I work on my strategy as well). I’ve added your strategy to my watchlist, so will check back often. Good trading!

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Thanks Raoul,. Yes the math is important to determine patterns and also remove any emotions from trading. I did spend a lot of time refining the model (over 6 months) and backtesting it in different scenarios. If you want you can simulate my strategy, I’ll offer you 1 month for free.

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Interestingly enough, this brings up the recurrent question “is simplicity key in trading?”

In fact, creating simplicity is, as it turns out, pretty complex. A given model can and should be constantly enhanced. What prevents getting lost in the resulting outcome of such a process is regular calibration of the model and a function to weight its variables depending on the market context.

As it seems, algorithms will substitute humans in the execution processes. Therefore, as traders we have no choice but to become less operational and more intellectual, thus to be less involved in eye-blinking reactivity of buy-sell gunfire type and much more involved in thinking, adjusting the methods we use on the run in order to keep up.

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Very well stated. Absolute truth.

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True.

I have to disagree on this one: strong, robust trading systems do not need any kind of “adjustment”, they keep working under all kinds of market conditions for decades, in up, down or sideways situations, because they have been designed that way from the beginning.

The ONLY thing that can sabotage an otherwise excellent trading system is the human element (not following the trading rules of the strategy for instance) and/or the money management part.

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I’d have to disagree on that.

You are supposing that, initially, the model is perfect. However, logically speaking, no perfection is possible. To quote Salvador Dali, “Have no fear of perfection - you’ll never reach it.”

Naturally, you should not question the model’s workings while you are operating it as that would be a lack of discipline which will ultimately lead to a negative performance.
The crucial upgrading process of the model happens while it’s at rest, as smartphones and computers get upgraded for instance notably following Moore’s Law. The new versions of these devices are released yearly not daily (though for many reasons, but you get the gist).

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