At the end of December 2022, we’ve tracked the Major Markets portfolio for full three years and over that time it has performed very well, entirely fulfilling its objective of generating positive returns, uncorrelated with traditional asset classes. This document offers a visual performance summary of the portfolio and of the 190 I-System strategies that comprise it.


For the purpose of this analysis we allocated $100,000 risk budget to each one of the 180 strategies comprising the Major Markets portfolio (excluding Bitcoin). Position sizes were set in a way that one standard deviation of daily P&L (profit & loss) changes corresponds to 20% of the risk budget, i.e. $20,000, resulting in a very moderate risk profile. The portfolio’s performance (after commissions) through December 2022 is illustrated below.

A well-diversified trend following portfolio is a robust diversifier; importantly, it provides a non-correlated source of returns as we saw in 2022 and also during the 2020 market turmoil. In both cases, Major Markets portfolio has diverged from adverse trends in stocks and bonds markets.

Both the Major Markets portfolio and the S&P 500 sustained their largest draw-down in 2020, in the aftermath of the March/April 2020 collapse. With regards to the Major Markets portfolio, given that the 14.66% drawdown is based on daily data, this was a very moderate decline (investment funds normally report draw-downs on the monthly basis, which partially obscures the worst draw-downs that would be visible in daily data).

After three years, monthly statistics for Major Markets portfolio compare favorably to S&P 500:

Keeping approximately the same risk exposure in all of the above 15 markets have generated the following performance (after all the commissions on trades and roll-overs)

Thus far, bulk of the gains came from exposure to energy and US Treasury markets. This year currencies (EUR, GBP, YEN) have also been strongly profitable. Of course, we never predicted any of this. But the beauty of trend following is that we never needed to.

Each curve in the above chart represents the average performance of the 12 individual trading strategies assigned to each of the 15 markets. The section below provides a visual performance summary for these strategies in each market.


Having lost ground in 2020, US dollar returned to strength in 2021 and in 2022 when a stronger trend emerged. This enabled our strategies to generate substantial gains, particularly against the hardest hit Japanese yen. The correction in Q4 2022 resulted in a substantial drawdown through the end of the year.

Resurgent USD strength reversed Euro’s appreciation through 2020. After the reversal, Euro’s weakness formed a trend through much of 2021 and 2022. Our strategies generated strong gains from that trend but had a substantial drawdown at the end of 2022 as the dollar weakened.
After a negative 2020 and only slightly positive 2021, YEN/USD has been the 2nd best contributing market to the Major Markets portfolio thanks to the LSPE that unfolded from March ‘22 onward.
Like the euro, British pound declined strongly through 2022. This trend enabled I-System strategies to new performance peaks through Q3 2022. The subsequent correction resulted in another drawdown, but the performance for the year remained strongly positive nonetheless.

Among the 12 strategies under USD/GBP, one is a clear outlier on the positive side. This observation almost invariably raises the question, why not just use that strategy, since it’s been the top performer? The problem is that we have no way of knowing which strategy will be the top performer in the future. Over the past 20 years we’ve seen time and again that even the best strategies can experience a losing streak and lose ground; we’ve also seen that laggards can pick up and become among our best strategies. There is simply no way to know this in advance. Rather than guessing, the best approach is to fragment the trading risk among multiple strategies of similar quality. Their cumulative result tends to be far more reliable over the long term.


US Treasury futures were among the top performers in this portfolio, and it is easy to see why: we’ve had a strong trend, interrupted only by mostly gradual and slow reversals (this reduces the whipsaw effect) with the exception of the one in July and August 2022.
This year was again very positive for our 30-year T-Bond strategies largely thanks to the strong trending moves throughout this three year period.
Although the German bund had a very sharp down-trend like the US Treasuries, its trajectory has been much more difficult to navigate; mid-year upward correction tipped all our strategies to the long side before prices resumed their downtrend. The result has been only a moderately positive performance for 2022.


2022 has been a bumpy ride on S&P 500. Although the index lost about 19% for the year, the multiple reversals along the way caused a whipsaw effect for the strategies and overall, negative performance for the year.
While our strategies did well to catch the three sharp price declines during 2022, each was followed by almost equally sharp upward correction. As a result, the strategies had slightly negative result for the year.
Volatile fluctuations in a horizontal range represent the most adverse market environment for trend following strategies: it’s all whipsaw with no trend moves. As a result, I-System strategies had a very bad year on FTSE.
With the exception of about 9 moths from mid-2020 through Q1 2021, the Nikkei has been consistently difficult terrain for trend following strategies, and Nikkei has been the most negative contributor to the Major Markets portfolio.


2022 has been a strongly positive, but difficult year for our strategies. All of the gains occurred in the first half of the year with the remainder amounting to a bumpy sideways drift.
The main difference between our Brent and NYMEX Crude (WTI) strategies is that WTI strategies use stop-loss and profit-taking signals, which often leads to underperformance during strong trending moves. However, after the 2022 price peak, these signals enabled WTI strategies to better navigate the subsequent price roller-coaster. WTI has been our top performing market.


Looking at Gold’s price trajectory over the past 3 years, I would expect that most trend following strategies would struggle to squeeze any gains from it; nevertheless, I-System strategies managed a slightly positive result for 2022, both on the long side in Q1 and on the short side mid-year.
Similar to Gold, Silver has been exceptionally difficult to trade and a positive performance for 2022 is cause for satisfaction.
Copper has been an excellent case study of the way trend following works; until April 2021, Copper was as close as it gets to ideal market for a trend follower. From there, we had a full year of sideways consolidation and the strategies gave up about 2/3rds of those gains. The sharp decline from June 2022 gave us another favorable “trend wind” to catch. In all a difficult ride, and a positive 2022 should be regarded as an excellent result.

On position sizing and its effect on performance in individual markets

Risk weighting is based on short-term price fluctuations: in more volatile markets we trade smaller position sizes and vice versa. For this reason, the U.S. 10-year T-Note (TY) turned out to be among our best performers: since it is less volatile than the 30-year Bond, TY exposure is proportionally larger. But as longer-term price changes were similar in both markets, TY generated greater profits. The issue is that we can easily measure the volatility of short-term price fluctuations which determine our position size, but we can’t predict the magnitude of large-scale price events which ultimately determine the performance of our strategies.


I’ve decided to report Bitcoin performance separately from the other markets due to the extreme volatility and price appreciation over the recent months. The chart below assumes about 5:1 inverse leverage (from the initial price of $7,000) to get the volatility of returns to a similar level with other markets.

Bitcoin trends and volatility have been extreme over the last two years. From the start of 2021, the price has staged three large reversals and a bearish trend in 2022. But apart for the big rally in 2020/21, it’s been about as fun to track as watching paint dry.

To a trend follower’s eye, Bitcoin strategies have done reasonably well; we have two outliers on the positive side, one on the negative side while six strategies traded broadly around the average. For an immature market with only 10 years of price history, this is not too bad.

When I added Bitcoin to the portfolio in May 2021 I wrote that, “The difficulty is that Bitcoin’s history consists of a series of hockey-stick rallies and long periods of sideways consolidation in between. This makes it very difficult to formulate high conviction strategies” but that using a set of trend following strategies would probably still prove better than discretionary trading of this roller-coaster.

Namely, the extremely volatile fluctuations in Bitcoin have periodically led to mass liquidations of hundreds of thousands of accounts of bitcoin traders who found themselves on the wrong side of large price moves. I believe that Bitcoin has only begun to mature as a market and that it has transcended the hockey-stick-then-drawdown sequence only in 2021. This will ultimately make Bitcoin more suitable for systematic trend following, but it will also douse the excitement of many traders looking for quick ten-fold returns. After 2021, Bitcoin will likely lose that ten-bagger allure and remain just another thing that fluctuates and periodically trends.


After three years with an unchanged set of 180 strategies (+10 for Bitcoin), Major Markets portfolio has done exactly what it was intended to do: catch windfalls from LSPEs (large-scale price events) while keeping the losses during trendless periods acceptable.

Consistent with our experience, we encountered a mix of significant market trends and also unfavorable periods of corrections and sideways price drift. By capturing large windfalls from trends and limiting the losses in adverse conditions, the portfolio has generated a very respectable compound gross rate of returns of 15.11% in spite of a very moderate risk profile.

The last year’s results (2022) have once more demonstrated another important advantage of systematic trend following: its ability to generate uncorrelated returns exactly when investors need it the most.

In 2023, we can expect more turbulence in the market and the risk factors include recession, inflation, the highly anticipated commodity super-cycle and unpredictable geopolitical developments. In this environment, high quality decision support could make the critical difference between the risk of painful losses and the reassurance of navigating these events profitably. If you haven’t done so already, we invite you cordially to subscribe to TrendCompass reports without delay. The first month is always free of charge, with no strings of any kind attached.

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