Investment Strategy

Automated strategies waiting for ideal market conditions to form.

Our Forté - Futures Trading

S&P 500 Index Options Pit

By Scott Olson, Getty Images

Our investment strategy allows flexibility, balances risk and creates a portfolio of absolute returns.

We employ pattern recognition trading the futures markets, a more efficient and fair market as opposed to stocks.

The use of futures allows us to:

  • Manage positions throughout the night when breaking news occurs.
  • Save on commissions and execution costs.
  • Obtain favourable tax advantages (60/40).

Diversification and high liquidity is built into our investment strategy by trading futures.

Effective Risk-to-Reward Management

The boundaries by which risk-to-reward can be pushed are known prior to opening a position, and managed until the position is closed. The Fund emphasizes 'limited risk' on all trades; meaning risk and maximum loss are both wholly calculated throughout the investment process.

Risk profiles are determined for each new trade which then influences the amount of capital allocated. When markets are trending strongly, the majority of profits are made. When markets are choppy and sidewards, the Fund reduces its exposure to safeguard its capital. Larger positions are allocated to higher probability trades, and smaller positions to lower probability trades.

The below risk mitigation measures are taken to ensure strategies are robust, and ready for trading with live markets.

SIGNIFICANCE TESTING
A popular statistical test to see whether a strategy has an edge, and is likely to hold up in the future. The test determines if the average trade is greater than zero with a 95% confidence.

As long as the standard deviation (spread of data from its mean) remains the same in the future, then the results continue to be valid. This is not a one-time only test, but applied periodically to a strategy as markets evolve and change.

Helps detect curve-fit or over-optimized trading systems.

MONTE CARLO ANALYSIS
Compares thousands of different sequences of past trades to determine if a strategy continues performing within expected bounds.

TRADE DEPENDENCY
This refers to if one trade depends on the previous trade. Do winning trades follow winning trades, or losing trades follow losing trades?

A Runs Test is calculated to decide if trade dependency has a high degree of significance (at least 95%). This determines if the next trade is skipped, increased or decreased, and by what amount.