Adopting a trend following approach may only be the first step toward achieving robust portfolio diversification. As most experienced investors know, the best market analysis can’t project far beyond the present. The same can be said of fund performance statistics. Both can tell you about what’s happening now (with a...
Have you ever wondered how certain trend traders have managed to build such incredible fortunes? You’ve heard the stories. Take Ed Seykota, for example. He turned an initial $12,000 investment into $15 million over twelve years. And then there’s Michael Marcus, who turned $30,000 into $80 million in less than twenty...
Let’s face it: nobody likes being uncomfortable. But sometimes you have to be willing to experience a certain amount of discomfort in order to reap the greatest reward. Trend-following trading is based on this principle. Let’s face it: nobody likes being uncomfortable. But sometimes you have to be...
Recently the CME brought to market the new Micro E-Mini Futures. The addition of these products make trend following trading with mini and micro contracts a great option for the small account trader. Trend Following strategies offer diversification and outsized returns for...
As we begin a new year and reflect on 2017’s performance I can’t help but wonder if this will be the year for commodity trend followers. I know I probably sound like a broken record preaching the trend following strategy and encouraging investors to stay...
AQR updates it paper on Trend Following performance over the last century. Despite the strategy experiencing poor recent performance, it brings tremendous value to stock and bond portfolios over time by 1) increasing returns and 2) lowering volatility and max loss. A win-win-win in my...
Cut short your losses, let your profits run on.
This principle above is the central tenet of trend following, a successful strategy for trading systems and CTAs alike. Digging through history, this maxim can be traced back all the way to David Ricardo, an eighteenth century British economist and trader, who retired a millionaire (wikipedia).
According to an 1838 book, The Great Metropolis, Vol II by James Grant, David Ricardo defined his golden trading rules as:
Crude oil has been in the news a lot recently. Just last week, after the OPEC meeting, its price declined by over 10%. With a lot of volatility, we wanted to test how a trend following strategy would have performed on the futures contract in...