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Trend Following with an Eye on Psychology

We feature a trend-follower with a distinctive method. WholeCapital founder Jan de Wever is a discretionary trader who looks for a behavioral edge while using a systematic model for risk control.

Mr. de Wever hails from Belgium but is currently based in San Francisco. He says he bought his first mutual fund at age nine and his first stock at twelve. He started trading futures at age seventeen. Prior to starting WholeCapital in 2009, he worked as a trader for Fortis bank (now BNP Paribas) in Brussels and arbitrage firm Flowtraders in Amsterdam.

He’s been trading for his own clients for only a few months, but sounds happy about his hybrid approach. We asked him to explain how he differs from other trend followers.

WholeCapital’s Global Opportunities Program is designed to profit from short- and
medium-term trends. But we’re not a typical commodity trading advisor. Our trading strategy is positioned between a CTA and a global macro approach.

The trading system is hybrid in nature; it combines (40%) systematic and (60%) discretionary elements. We feel this provides the flexibility to adapt to the infinitely complex and ever-changing marketplace while conserving the repetitive process of a systematic trading model

The trading program incorporates technical analysis as well as ideas from behavioral finance. In essence the trading model aims to profit from recurrent human behavioral tendencies through pattern recognition, volatility and inter-market trend analysis.

Risk management is entirely systematic, with risk limits on each trade and an overlay on the entire portfolio to make sure we don’t risk more than 5% on strongly correlated positions.

The other systematic component is in identifying entry signals. But there is discretionary choice from systematically generated signals: when there are three or four entry signals, we will the choose the one that I perceive as having the best risk/reward profile.

In addition, I apply a additional psychological screening where we seek trades that look and feel the most uncomfortable. That’s because I believe that in the market there is a trade-off between being comfortable and making profits. Does that make us a contrarian? “Yes” in the sense that we will look for less crowded trades, but “no” in the sense that we don’t tend to go against price action but look for underlying relative strength and weakness.

We focus only on the most liquid markets. Positions are clustered around five to ten liquid global markets that are predominantly driven by speculative flows. Mainly Gold, Crude Oil, T-notes, T-bonds, S&P, EUR/USD, JPY/USD, GBP/USD, AUD/USD & CAD/USD. The target for the program is to achieve +20% annual returns with a worst peak-to-valley drawdown of 15%.

WholeCapital is a company with a higher purpose. We aim to build wealth for our clients and also make them feel good about the company they are aligning themselves with. 10% of our own profits will be donated to targeted charitable projects.