• The confusing economic indicators puzzle the most sophisticated investors. The pundits keep on changing their market forecasts and earnings forecast. The slow down in the west is clearly reflected in lower consumer confidence , companies hoarding lots of cash on their balance sheets. A typical investor is confused. Absence of market trends makes it more challenging for directional strategies. Market Neutral, Relative Value, Fixed Income strategies have done well in the past seven months on a risk adjusted basis. The strategies that are immune to market direction will be able to make investors smiling in my view .

Overnight Gaps – An overnight gap is where the market opens significantly above or below the closing price of the previous day. This can suggest significant volatility lies ahead, and Strategic looks to play this setup by either going in line with the gap (if smaller) or fading the gap in expectation of it reversing course (if larger).

Continuation Patterns – Strategic attempts to identify low risk entry points that can get the system into the market in the direction of a strong trend, by looking for continuation patterns.  A simple example of a continuation pattern would be a market, which is making higher highs and lower lows.

Range Expansions – Most long volatility systems operate using range breakout logic.  This logic brackets the market when it enters a lower volatility consolidation pattern, and the Strategic system includes this logic as well – looking to identify periods where the market has been quiet for a specific period, in hopes of anticipating when and where the market is getting set for some short term explosive moves.

Seasonality – This is one of the main parameters which sets Strategic apart from many other trading systems. The system uses seasonal analysis such as going long on the first trading day of the month and the Monday before options expiry. In addition, a seasonality filter is applied across all other trading parameters, requiring that they occur in the same direction as the current favorable seasonal period in order to trigger a trade.

Overbought/Oversold – This is another component which sets Strategic apart. Most trading systems either look for a breakout from a move higher or lower, or fade the move in hopes of prices reverting to the mean – not both. Strategic has components which do both, and the overbought/oversold component looks for opportunities when the market overextends itself in either direction, putting in orders to fade the crowd and to trade a snap back in the opposite direction.

Reversals – Similar to the oversold component, the reversal logic within Strategic looks to identify periods where the market has over-extended itself on a specific day, in anticipation of a move in the opposite direction on the following day.

Volatility Entries – this parameter is in stark contrast to the preceding two, but they somehow co-exist in the Strategic logic.  This logic looks for trade entries x% above and below the opening price of each time period throughout the day, looking to get in line with a big move in one direction or the other once the market has moved significantly outside of the normal “noise” level.

Exits – no model would be completes without considering the exits, and Strategic’s exits are again based on the market moving x% above or below the opening price of the time period immediately following a set amount of time (Mr. Gibbs is keeping what exactly that time frame is to himself) the system has been in the existing position.  The system also incorporates several other exits, which trail the stop and exit the trade early should the market reverse against the original position. [Disclaimer: stop orders cannot guarantee an order is filled at the desired price]

 High Frequency Trading – Consistent Upside – Sharp Ratio 6

The benefits of algorithmic trading include consistent returns, low risk profile and a diversified portfolio. Steffen says he likes working with Da Vinci in high frequency trading because it is a very competitive space. He says “you can’t sleep” because you have to constantly develop new strategies. But he likes the fact he can verify if he has done a good job on a daily basis through his portfolio’s performance.

BACKGROUND

Steffen is from Germany. He graduated with a degree in mechanical engineering from the University of Aachen, a famous engineering school in Germany. For the next eight years, Steffen worked with Formula One racing as an engineer for two teams, British American Racing and Toyota F1. In addition to formulating race strategies, his job was to analyze every aspect of the cars and make them go faster. Steffen started trading his own portfolio in 2000 and after spending up to 140 days on the road per year with the race teams, he decided to try something else so went back to school at the International University in Monaco and obtained a degree in finance. He met Hendrik, the Da Vinci CEO, at a conference when Hendrik was speaking at the University. As an early adopter of the algorithmic technology, Hendrik was looking for someone to run the algorithmic trading models and with Steffen’s background in programming, there was a fit. Steffen started work at Da Vinci in February 2009.

ROLE

• Generate ideas and develop new trading strategies
• Write the code for each idea/strategy
• Testing, backtesting, calibrating the strategy
• Monitoring the programs during the day
• Always looking for further improvement opportunities

Steffen trades liquid future contracts on the Eurostoxx and German interest rate curve. He trades options on the Eurostoxx, DAX, Bund, Bobl and Schatz. A smaller part of his trading volume involves futures and options on the Swiss SMI which is also traded on the Eurex.

Steffen started from scratch and implemented the program a year ago. He says for the first couple of months, it was challenging to get up and running. He had to “get to know” the program, the hardware and figure out how to make money using technology to outsmart the markets. In May 2009, he launched algorithmic trading for Da Vinci with his first successful trades. With a few minor down months, he has generated positive monthly performance and the returns are gradually increasing every month. Steffen is constantly developing new strategies to complement other strategies because he says after some time, old strategies might not work anymore. He is better able to generate consistent returns by implementing more and diversified strategies.

EDGE

• Speed of the trades – Da Vinci has a server located next to the Eurex Exchange in Frankfurt. Steffen says the faster you get your orders through to the Exchange, the better because invariably there are traders placing orders in the same direction.
• Ability to cover costs – Steffen says the system has very high running costs and he has to make money in order to cover those costs which include the connection to the Exchange, hardware hosted in Frankfurt, connection in Zurich, software and subscriptions to the various data feeds used in the programs.
• Diversification of strategies – strategies other people don’t have and don’t exploit – Auto-Eye, Order Book Strategies, News Trading
• Controlled risk – in algorithmic trading; typically, Da Vinci’s algorithmic strategies hold a position from less than a second to approximately two to three minutes. They do not hold positions overnight. A single trade generates only a small profit, however losses are cut quickly and the trade frequency is high. The edge is the potential upside compared to the potential loss. Steffen’s program only trades if there is a clear edge

Da Vinci manages $42M across two funds – the Da Vinci Arbitrage Fund and the corresponding UCITS III vehicle. Target capacity for the strategy is $500M and we intend to reach $100M in 2010. We have a dollar, euro, sterling and Swiss Franc share class. Da Vinci is open for new subscriptions weekly for Da Vinci Arbitrage Fund and daily for the UCITS III. Please contact me for further information and subscription documents.

Da Vinci System Selector
Geplanter Ausbau des Algorithmic Trading / Der Da Vinci System Selector:

• Unabhängigkeit von Portfoliomanagern
• Sehr geringe Korrelation zu bestehenden Handelsstrategien
• Konstante Erträge durch die Skalierbarkeit der Strategien über Märkte und Produkte
• Auto-Eye Optionspreis Arbitrage bei Marktungleichgewichten
• Orderbuch Strategien Analyse der Orderbuchstruktur
• News Trading Schnelle Reaktion bei der Publikation von Wirtschaftszahlen

Zusammenarbeit mit starken Partnern:

• Proximity-Lösung bei der Deutschen Börse in Frankfurt
  (Equinix / Fixnetix) Software-Lösung von Sol-3

Die Allokation in die Systeme erfolgt nach einem internen Sortino Ratio jeden Monatsanfang neu. Das Risikomanagement ist auch komplett automatisiert.

Technische Infrastruktur
Mit unserer Handelssoftware hat Da Vinci Invest AG für die Entwicklung komplexer automatisierter Handelsstrategien eine nicht nur innovative sondern auch eine zuverlässige Lösung gefunden. Die im Algo-Trading unersetzlichen Kriterien werden hier intelligent gebündelt: Die hochtechnologische Serverstruktur garantiert eine schnelle Anbindung an die wichtigsten Börsen der Welt und entscheidet im Algorithmic Trading zwischen Gewinn und Verlust.

http://www.cnbc.com/id/15840232?video=1405420235&play=1

back @ Zurich, after traveling to Nice and London

watching the Jackson Movie

Viele Leute sagten in letzer Zeit zu mir:”Nirgends ist das Geld mehr sicher. Da lege ich doch lieber mein Geld unter das Kopfkissen.” Ich halte dies für keine gute Idee. Das Geld könnte gestohlen werden. Man befürchtet ständig, ausgeraubt zu werden. Weitere Gefahren sind Wohnungs- oder Hausbrand, einfach das Versteck nicht mehr wiederzufinden oder eine Währungsreform terminlich zu verpassen. Das ist also keine gute Alternative zur Bank. In der Schweiz ist jedes Konto von Spar- und Festgeldern nur bis 30 000 CH versichert. In anderen Ländern ist diese Summe noch geringer.

Anleihen
Investiert man das Geld in Anleihen, zählen diese Wertpapiere nicht zum Vermögen der Bank, sondern, genau wie Fonds, als Sondervermögen. D.h. der Insolvenzverwalter darf diese Wertpapiere im Konkursfall der Bank nicht zur Insolvenzmasse rechnen, und man reiht sich nicht in die Gläubigerliste mit quotaler Auszahlung ein. Stattdessen werden die Wertpapiere sofort an den Anleger zurück übertragen. Damit wäre man gegen den Bankkonkurs gefeit. Eine Hyperinflation würde aber festverzinsliche Wertpapiere auch entwerten. Sowie die internationalen Regierungen derzeit Schulden aufnehmen und Geld drucken, ist dieses Risiko nicht unrealistisch.

Aktien und Immobilien
Aktien dürften generell auch nicht so gut rentieren in den nächsten Jahren im Zuge einer weltweiten Finanz- und Wirtschaftskrise. Die USA werden fast alle Länder in eine Rezession reissen. Die Kaufkraft sinkt, es wird weniger konsumiert. Nur sehr wenige Unternehmen können sich diesem Abwärtstrend entziehen. Vielen Anlegern gelingt es schon in guten Zeiten nicht, die Benchmark zu schlagen und die besten Aktien auszuwählen. In Krisenzeiten halte ich dies für nahezu unmöglich. Aktieninvestments sind riskant. Das gleiche gilt für Immobilien. Zwar gab es in der Schweiz keinen Immobilienpreisboom und keine Preisblase, aber bei sinkender Kaufkraft werden Immobilien in der Regel nicht teurer. Immobilien und Aktien bieten aber einen Schutz vor Hyperinflation, nicht aber vor gierigen und schlechten Vorständen.

Sachwerte
Sachwerte sind eine gute Anlagemöglichkeit im Moment. Man sollte Sachwerte auswählen, die einen praktischen Nutzen im Konsum oder der Industrieanwendung erfüllen (abgesehen von Schmuck, kein Gold!) und deren Preise im Zuge der Kreditauflösung von Hedge-Fonds und Banken ungerechtfertigt gefallen sind. Dazu zählt auch Gas, Mais und Öl kurzfristig. Wenn Sie nebenbei noch etwas Gutes tun wollen, investieren Sie in Waldfonds! Um Bäume zu pflanzen, müssen diese Fonds Ackerland oder Regenwaldboden erwerben. Der Holzpreis wird in den nächsten Jahren aufgrund verstärkter Nachfrage der BRIC-Staaten nicht sinken und Ackerlandpreise sind zurzeit tief. Hier kann eigentlich nur eine Preiserhöhung folgen, falls es zu Bauland erklärt wird. Die Bäume wachsen jedes Jahr, und Ihr Investment wächst somit stetig an. Zusätzlich bekommen Sie C02-Zertifikate gutgeschrieben, die auch zur positiven Rendite beitragen. Dem stehen politische Risiken in bestimmten Ländern entgegen. Zudem könnte natürlich schlechte Arbeit des Forstbetriebs vor Ort die Rendite schmälern.

Fazit
Grundsätzlich halte ich in der Finanzkrise direkte Investitionen in Sachwerte durch Wald- und Sachwertefonds (EFTs) von seriösen Anbietern für die beste Anlage.