Francesco Maggioni

Primary goal is capital protection. Then positive returns from investments or trading in stocks, futures, bonds and commodities. Quantitative approach for asymmetric results

Methodology

With this approach the goal is to take positions where risk is limited compared to the reward it can be achieved, therefore I look for

Asymmetry in the results I can generate

How the goal is achieved?

Diversification

Diversification is achieved:

  • By instruments: futures, stocks and etfs.
  • By asset classes: equities and equity related, commodities and bonds (last one only via futures or etfs).
  • By geographic extension: (US, Europe, Latam and Asia).
  • By time frame: trades are exploited in a multi time frame environment ( 60 min, 240 min, daily, weekly and monthly).
  • By trend directions: in normal conditions not all the above instruments trend in the same direction at the same time.

Trend recognition

Trend trades: wider in time and price.

Countertrend trades: limited in time and price.



No Trend: typically no trades or countertrend type of trades

Multi time frame trades

Trades can be exploited in a multi time frame environment due to:

  • Fractal theory: A fractal is "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole,"a property called self-similarity.
  • Technical indicators: such as MACD, Stochastic and Fibonacci. If those indicators (as an example) are not violated, trend is intact. Otherwise a new trend is in formation.

Risk Management

Risk Management is involved in the following areas:

  • Constant review of the fear factors:
    • VIX Index (historical range 14-18: a red light is on when below 14 and above 18)
    • Bund / US Treasuries as flight to safe heaven (yield vs. inflation)
  • Size limits of each position on overall portfolio in terms of stop loss dollar amount.
  • Active money managment to constantly revise overall fixed total market risk accepted.
  • Rigourus execution of three dimensional exits.

How a position is taken

Constant monitor all the mentioned instruments for signals, either through software screeners or human generated signals.

Once highlighted a possible candidate, a first 25% of the full size is allocated with a stop loss.

As the position goes in my favour, incremental 25% is added on retracements until full 100% is reached, with stop losses moved to break even.

A monetary stop loss is allocated first and then calculate position sizing backwards.

$$ Stop loss → % Stop loss → Size of position

How a position is exited

Exits are three dimensional:


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