The strength of the strategy is identifying trend changes and the ability to place high probability trades on short-term pullbacks. However, identified trend changes often happen to be longer-term. Therefore, the strategy can re-enter a position in a momentum-increasing market after having taken profits in a first counter-trend position.
Trade Signals are generated on weekly trading bars and activated on daily trading bars to optimize entries and exits of trades.
1512 SGCM strategies choose trades very selectively to not make generated alpha deteriorate by unnecessary brokerage fees. I.e. the main trading strategy currently has about 400 round-turns per year.
The trading philosophy implies that being 100% in cash can help building true alpha. While competitors may want to be invested at all times although trading signals are not fully confirmed, 1512 SGCM’s strategy is about 20% of all trading days fully invested in cash. This leaves room for further trading strategies or more conservative investments. 1512 SGCM strategies take high conviction trades or no trades.
1512 SGCM’s strategy is negatively correlated to equities (around -0.05), and only slightly positive to CTAs (around 0.05). It therefore not only serves as sustainable alpha element, but also as effective diversification tool in any given portfolio.