Category: sortino ratio
| |Many traders and investment managers have the desire to measure and compare CTA managers and / or trading systems. Risk-adjusted returns are one of the most important measures to consider since, given the inherent / free leverage of the futures markets, more return can always be earned by taking more risk. The most common risk-adjusted performance indicator is the Sharpe ratio. While the Sharpe ratio is definitely the most widely used, it is not without its issues and limitations. We believe the Sortino ratio improves on the Sharpe ratio in a few areas. However, the purpose of this article is … Read more Sortino: A Sharper Ratio
| |Success in trading is measured in terms of the growth of the account balance. A CTA is not expected to play God and call every twist and turn in the market correctly at all times. As a matter of fact, some professional and proven CTA’s systems are only correct 25-30% of the time and they still manage to pull huge profits out of the markets consistently. What distinguishes the “Pros” from their less successful colleagues is their ability (a) to recognize an error promptly and (b) to take necessary action to correct and prevent the error from becoming a financial … Read more What are the Biggest Errors in Trading a CTA Could Make?
| |Trend following is the most prevalent strategy utilized throughout the managed futures industry. What is the best way to objectively analyze, measure, and compare the performance of a particular group of trend following CTAs? Last fall we attempted to answer this question by publishing a research paper that introduced our own metric that measures and compares the “goodness” of similar managers’ returns. This article updates that original piece, and the measurements and ranking methodology that we initially introduced remain the same … Read more Red Rock Capital – An Honest Update on the Trend Following Landscape