Aditres Capital : St.Gallen I Counter-Trend

Summary

1512 SG Capital Management Inc. combines discretionary trading proficiency with a quantitative strategy parameterization to identify high-probability trend changes in the major futures markets. The strength of the trading strategies is to identify trend changes of about 5% and grasp 2-3% of the referring move.

Investment Strategy

1512 SG Capital Management believes that market movements occur according to the positioning of the main players in each market. Therefore, research focuses on identifying the main investors for each market to then track activities of this investor group. 1512 SGCM analyzes about 130 futures markets with the purpose to find out how different investor groups shift their portfolio on a weekly basis. Investors are grouped into big investors (e.g. commercials, big institutions, corporates) vs. crowd/ retail investors. For this analysis own indicators are applied, which transfer information across markets into a score between 0 and 100 which give insight whether main investors in respective markets are rather positioned for a bull market or a bear market. Used information include combinations of price action, volume, volatility, Commitment of Trader Reports, intercommodity relationships, interdelivery spreads and more to systematically trade in the direction of the "commercial traders' money".

Risk Management

Risk management is applied on four levels: 1.) Money management is applied on current NAV, thus if one position is down, the second position will have a lower exposure compared to the initial NAV. 2.) Trade level: The strategy focuses on high probability trades and acts therefore very selectively. Once entered into a position, take profits and stop losses are automatically activated according to pre-defined rules. Where stop loss orders are equipped with a fast adjusting trailing mechanism. Last, a time-out method is applied as another risk-minimizing factor. 3.) Portfolio level: Before entering a new trade, it is analyzed how much risk it will add to the overall portfolio – leading to some trades being excluded. Analysis include P&L of current positions held, correlation and scenario analysis. Historically, the portfolio never held more than six positions at the same time. Average positions are between two and three. 4.) Leverage: Margin-to-equity has not exceeded 20% historically and will be capped at 25%. When invested, ratio is around 10-12%. Average margin-to-equity is fairly below 10% since about 20% of all trading days are fully invested in cash.