Many of the investment and trading approaches available today simply do not perform the same way in the real world as they do during simulation. This is why it’s important to “look under the hood” of your trading strategy to understand how something works instead of simply taking it on faith.
This episode’s guest has appeared on the podcast twice before. Eric Crittenden is one of the key mind’s behind Longboard Mutual Funds, a firm that has over 300 million dollars under management. Crittenden was also featured in Michael Covel’s “Little Book of Trading”.
In this episode, Eric Crittenden talks about creating a mutual fund based on trend following principles, why investment returns are not normally distributed, how financial simulations differ from the real world, and how to control risk in a trend following system.
Eric has many insights into trend following and trading in general, and has the financial data to back up his findings. He has also published several research papers on the matter, which are linked to below.
In this episode of Trend Following Radio:
- Relative momentum vs. time momentum
- Survivorship bias in the financial advisory market
- Defining risk – how much are you willing to lose?
- Why trend following works for both high-risk and low-risk assets
- Identifying the “sweet spot” client for fund managers
- The difference between most mutual funds and direct-managed funds
- Financial simulations vs. real life
“It’s a formula driven process, it’s a set of rules that everyone has agreed to that are very clear. They are very simple to implement, it just requires discipline, attentiveness, and realistic expectations” – Eric Crittenden
Mentions & Resources:
- Longboard Mutual Funds – Eric’s firm
- Eric Crittenden Interview #1 on Trend Following Radio
- Eric Crittenden Interview #2 on Trend Following Radio
- The Little Book of Trading by Michael Covel
- Eric Crittenden’s research papers published on Michael Covel’s site:
- Does Trend Following Work on Stocks? Part I and Part II
- Trending Stocks are Responsible for Virtually All of the Market’s Gains
- The Need for a Sell Discipline
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