The CTA strategy is known as the most "diversified" strategy. Due to the characteristics of the managed futures fund itself, it can provide diversified investment opportunities, from commodities, gold, to currencies and stock indices. Therefore, to a certain extent, the decision-making of managed futures funds generally relies heavily on computer programs, which makes the correlation with traditional investment varieties low, and the overall investment portfolio risk is greatly reduced.
CTA strategies are mainly divided into three categories: trend following strategies, shock strategies, and arbitrage strategies . This article focuses on trend following strategies.
Trend Following Strategies
Trend following strategies can be divided into intraday trend strategies and intraday trend strategies. It often enters the market in the direction of the market trend. If the trend continues, it can eat a large wave of profits.
When the market is in a rising or falling trend, the strategy can track the market trend and gain profits; on the contrary, when the market is consolidating and fluctuating within a certain range without a clear direction, the strategy will continue to wear and tear. The basic logic of the strategy is that the price will move according to a certain trend, and the trend will continue. The distribution of financial asset returns is often not normal. Due to the existence of events such as "black swans" in the financial market, the distribution of returns has a "spike and thick tail", and the important source of profit for trend following strategies is the It is to grasp this "thick tail" .
The more well-known intraday trend tracking strategies include: R-Breaker strategy, DualTrust strategy, ATR strategy, Fiali quadrature strategy, sky garden strategy, etc.; intraday trend strategies include: Moving Average Strategy, Aberration Strategy, Kinkentner Strategy, Bollinger Bands channel strategy, etc. You can check the relevant information by yourself. Like these well-known strategies, you can generally find strategy introductions and even quantitative codes.
(some of the more well-known trend following strategies)
Here we focus on one of the strategies, the R-Breaker strategy:
Simply put, the R-Breaker strategy is a strategy for entering the market based on support and resistance levels. It calculates seven prices based on yesterday's highest price, lowest price and closing price: one central price and three support levels. , and three resistance levels.
Then, according to the relative positional relationship between the current price and these support and resistance levels, the trigger conditions for buying and selling are formed, and through certain algorithm adjustments, the distance between the seven prices is adjusted to further change the trigger value of the transaction.
Correspondingly, we can calculate the observation ask price, reverse ask price, reverse bid price, observation bid price, and breakout ask price respectively. These 7 price levels are also the trading signals we want to pay attention to.
From this we can see that the R-Breaker strategy draws a grid-like price line based on yesterday's prices and updates these price lines once a day. In technical analysis, support and resistance levels, and the roles of the two can be converted into each other. When the price successfully breaks above the resistance level, the resistance level becomes the support level; conversely, when the price successfully breaks down the support level, the support level becomes the resistance level.
In actual trading, traders' judgment on the direction of opening and closing positions and the precise buying and selling points depend on these support and resistance levels. The specific conditions for opening and closing positions can be flexibly customized according to the intraday price, center price, resistance level, and support level, and can also perform position management for adding and reducing positions based on these grid price lines.
Furthermore, this strategy has two modes, which are trend mode and reversal mode .
The transformation of trend and reversal mode is that if there is a position, it will enter the reversal mode. When holding a long order and the highest price of the day is greater than the observed selling price, the price falls below the reverse selling price and the long position is closed. Go short; on the contrary, when you hold a short order and the lowest price of the day is lower than the observed buying price, the price breaks through the reversal buying price, and the short position is closed and the backhand is long.
The key to the popularity of the R-Breaker strategy is that it is not a pure trend-following strategy, but a compound strategy that earns both trend alpha and reversal alpha returns. Now this strategy is not necessarily profitable, but if it can be improved, I believe it can shine in market transactions and gain considerable profit margins.
Of course, no matter what strategy it is, it will only make money when the market meets the expectations of the strategy. When the market situation is uncertain, it will cost a certain amount of trial and error, but in the long run, it will make big profits and small losses, and the benefits will be considerable. No CTA strategy is profitable in all market conditions. Different strategies favor different markets.