The Core Principles of Systematic Trend Following Part 2 of 2

In the compelling second part of their discussion on "The Algorithmic Advantage," Moritz Seibert and Moritz Heiden from Takahe Capital returned to delve deeper into the intricate world of systematic trading and risk management. This episode, rich with technical insights and strategic depth, offered a fascinating exploration of Takahe Capital's unique approach to trading.

The episode opened with a brief technical foray into the operational backbone of Takahe Capital. Moritz Heiden shared the details of their in-house developed trading and back-testing systems. He emphasized the empowerment and robustness that come from having complete control over their technological infrastructure, highlighting the scalability and efficiency afforded by modern cloud computing solutions. This segment underscored the importance of a solid technical foundation in the realm of quantitative trading.

Shifting focus to Takahe Capital's trading strategies, the conversation explored their two primary standalone trading programs. The first, a classic trend-following system, is built on breakout models. This program is characterized by its long-term focus, with an average holding period of trades extending to 200 days, and occasionally even longer. The second program revolves around trading commodity calendar spreads, tapping into the seasonality and unique market dynamics of different commodities.

The third Program of Takahe Capital is the integration of their two standalone programs into a comprehensive fund, known as the Global Quantitative Fund. This integration, however, is not a mere addition of the two programs but a strategic combination that harnesses the unique strengths of each. Seibert and Heiden explained that while each program operates independently based on its core principles, their fusion within the fund allows for a dynamic interplay, creating a more robust and diversified trading strategy.

As the dialogue progressed, Seibert and Heiden discussed the balance between simplicity and complexity in their trading models. Despite exploring a variety of sophisticated strategies, including cross-market spreads and synthetic markets, they consistently found themselves gravitating back towards simpler, more timeless trading approaches. This part of the conversation highlighted the importance of not overcomplicating strategies and the value of sticking to proven, enduring methods.

Risk management and options trading were also key topics of discussion. Seibert shared his approach to using options to enhance the resilience of their portfolio. Focusing on long optionality and convexity, he explained how they leverage options to capitalize on potential outliers in the market, thereby adding a layer of protection and the possibility of significant gains.

Throughout the episode, both Seibert and Heiden reiterated their commitment to the core principles of trend following. They stressed the importance of keeping losses small and allowing winners to run. Despite their openness to exploring new ideas and strategies, they remained firmly rooted in these foundational trading principles, viewing them as essential to long-term success in trading.

Addressing the changing dynamics of the markets, they discussed the need to recognize when a strategy no longer works effectively and the necessity of adapting or stepping away from it. This segment of the conversation underscored the importance of agility and responsiveness in the ever-evolving world of finance.

This second part of the series with Takahe Capital offered a deeper, more nuanced look into the world of systematic trading. Blending detailed technical insights with strategic depth, the episode provided listeners with a comprehensive understanding of the complexities and challenges inherent in quantitative trading, emphasizing the importance of adaptability, simplicity, and a solid grasp of market dynamics in this intricate field.

Getting in touch with Takahe:

w: www.takahe.capital

x: https://twitter.com/moritzseibert

x: https://twitter.com/moritzheiden

li: https://www.linkedin.com/in/mseibert/

li: https://www.linkedin.com/in/moritz-heiden-45a90548/