|
|
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.
|
RSS
