Crunchster's Turtle and Trend System

2023년 7월 26일

This is a combination of two popular systematic trading strategies - in the trend following category.

The strategy is designed for use on the daily timeframe. Specific features of this system are outlined below:
1. Two different strategies to choose from, "Trend" which is a volatility adjusted Exponential Moving Average (EMA) crossover strategy and "Breakout" which is my adaptation of the well documented "Turtle Strategy"
2. Uses advanced position sizing and risk management, usually reserved for institutional portfolio management, a proven technique utilised by Commodity Trading Advisors and Managed Futures funds (Algo/Quant funds).

"Trend" uses a fast (user defined) and slow EMA crossover, where the slow length is 5 times the fast length. The resulting signal is adjusted for the volatility of returns over a 252 lookback period, which helps to normalise the signal across different assets. The system goes long or short when it detects a new trend has formed.

"Break" uses the highest high or lowest low over a user defined lookback period to define the recent range. This is converted into a price normalised signal to allow the system to detect when a breakout occurs. The system goes long or short based off the breakout signal.

Position sizing is based on recent price volatility and the user defined annualised risk target. In essence positions are inverse volatility weighted, so larger size is opened during lower volatility and smaller size during increased volatility. Recent volatility is calculated as the standard deviation of returns with 14 period lookback, then extrapolated into an annualised volatility of expected returns. Annualised recent volatility is then referenced to the risk target set by the user to adjust the position size. The default settings are a conservative 15% annual risk target/volatility. Initial capital should be set as the maximum risk capital per trade (ie if $10,000 total capital and 10% risk per trade, initial capital should be $1000). Maximum leverage per position can be set independently, to facilitate hitting risk targets that are greater than the natural volatility of the traded asset, and to accommodate low volatility conditions, whilst maintaining overall risk controls. Direction (long or short) is at the user's discretion.

Hard stop losses are based on multiples of the average true range of recent price (14 period lookback), user configurable.

Strategy trailing stops are based off recent highest highs or lowest lows (user defined lookback) to cut the position if the trend or momentum is lost.

Although both strategies can be run simultaneously, optimal diversification will be achieved if ran separately/individually to avoid masking of entries.