Alpha Trend’s investment philosophy is based on the following theses:
– All relevant information is reflected in historic price movements.
– Quantitative analysis is the most effective way of accessing information about future market price movements.
– Historic price movements repeat and provide investment opportunities.
– Diversification across a broad range of markets maximizes the investment opportunity.
– Alpha Trend capitalizes on market moves driven by investor behavior in a systematic and disciplined way.
The system tries to exploit profit opportunities based on market participant’s behaviors. There are psychological reasons behind the existence of trends and there are also economical reasons for some participants to reduce volatility. The philosophy of the system is to trade with the trend and take on volatility. That is achieved by selective short-term trading in line with the longer-term trend and having the risk management focused on drawdowns instead of volatility reduction.
The program takes selective breakouts in the direction of the trend by a unique combination of level identification and identification of market structure. The methodology leads to trades in varying holding periods with the average trade lasting 28 days but some positions can be held for 6 months and longer. The strategy is applied on a diversified futures portfolio of 74 markets but being selective in position taking holds full positions only in 29 markets on average. The model and its parameters are the same for all markets in the portfolio.
Our risk management is focused on drawdown control and worst case scenarios. The risk management is an integral part of the model and takes a bottom-up approach when evaluating portfolio risk. The sizing of new positions is dynamic and based on the volatility of the markets and the total risk in the portfolio at the time of entry. All position risks are accumulated to achieve a better estimate of a worst case scenario and to avoid an over-reliance on low or negative correlations.
Clarke Capital Management, Inc. provides alternative investment programs through managed futures accounts for those seeking investment opportunity apart from the stock and bond markets. Employing sophisticated trend-based trading systems, Clarke Capital Management has compiled an impressive track record trading a widely diversified range of commodities via established futures exchanges around the world.
The Jupiter program currently trades approximately 61 domestic and international commodity interests. 17 of these are either long or short interest rate contracts reflecting interest rates in Europe, the US, Canada, Japan and Australia. The balance of the commodity interests followed are currencies, grains, softs, metals, meats and fuels both foreign and domestic. The number of models used in this program is 66. Unlike many of the other programs of CCM, the Jupiter Program uses several very long term models among the 66 in its portfolio. These very long term models generally produce larger profits per trade, but lower profits per day than shorter models. When used in a portfolio with shorter time frame models, as is the case here, they can produce smoother overall equity curves even though these models generally give much more room to a position before exiting. It should be noted that there will be times when there is significant correlation between markets within a market sector or between market sectors, possibly in an adverse direction to positions held in the client’s account. Clients of the Jupiter program should be aware that this factor alone, although there are others, will lead to periods of extreme volatility and possibly very large drawdowns in an investor’s equity.