PROPOSED MONEY MANAGEMENT METHOD AS PART OF RAPIT MOMENTUM ALGORITHM TRADING SYSTEM AT PT TRIMEGAH SECURITIES, TBK

• Main Author: ADHI PAMUNGKAS (NIM: 29109380) ; Pembimbing : Dr. Ir. Budhi Arta Surya, PITRA
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/19138
• Institution: Institut Teknologi Bandung

PT Trimegah Securities, Tbk as one of leading securities company in Indonesia is planning to develop algorithm trading system to be deployed as one of its investment product. An algorithm trading system called RaPit Momentum has been previously developed and proposed to Trimegah. This proposed algorithm trading system has shown an attractive risk-return profile. The risk-return profile of this proposed trading system is superior to the majority of mutual funds in Indonesia, with exception to Panin Dana Maksima fund. Based on data from Infovesta in 2011, Panin Dana Maksima controls 16% of overall mutual fund market in Indonesia. This shows that risk-return profile of Panin Dana Maksima is favored by investors. Hence, it is beneficial to modify RaPit Momentum trading system to outperform risk-return profile offered by Panin Dana Maksima. The modification of RaPit Momentum trading system is performed on the money management component instead of its technical indicators. This approach is taken because it is a non-intrusive approach does not change the philosophy behind RaPit Momentum. The resulting trading system is referred as Modified RaPit Momentum. The performance of RaPit Momentum trading system was measured based on equity curve generated from walk-forward test which shows hypothetical historical result, and cannot be used to indicate future performance result. An Excel VBA program that incorporates <br /> <br /> <br /> <br /> <br /> Monte Carlo simulation is developed to indicate a more reliable metric for future performance of RaPit Momentum trading system. The simulation result shows that RaPit Momentum is expected to generate 30.40% of compounded annual growth rate (CAGR) and standard deviation of 19.58%. <br /> <br /> <br /> <br /> <br /> Modified RaPit Momentum is built using money management method that combines the characteristics of two method; fixed fractional method and Kelly method. The resulting money management method incorporates two important attributes; every position is adjusted according to its volatility, and risked capital never exceeds Kelly fraction. Another Excel VBA program is developed to find the appropriate fraction to be used in the money management. Incorporating this money management method, the Modified RaPit Momentum is expected to generate CAGR of 45.20%, but also accompanied with increase in annualized standard deviation of 26.10%. The result is superior to Panin Dana Maksima which offers CAGR of 40.55% and standard deviation of 28.49%. The Modified RaPit Momentum is proposed to be implemented as discretionary fund whose revenue is based on profit sharing instead of the more common transaction-based fee. This is chosen to align the objective of the company with the objective of the investors.