Choosing the Right Trading Instrument for Trend Following

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Hi Michael,

Let me tell you I really enjoy your podcast. I have learned so much from you interviews, and even more from your monologues (favorite episodes).

After getting inspired by your book “Trend Following”, and reading several others like “Trend following with Managed Futures”, decided to build my trend following system.

I am running a long term trend following strategy with 46 markets, using 35 expiring CFDs and 11 futures. I’ve been running the system for 3 months now and every day I am more convinced this is the right way to go; therefore it is the core of my investment portfolio at 40-50% allocation of my total capital. I love this stuff!

Based on your experience, I wonder if you could help me with the following:

Got very interested in the single stock futures after reading about them in your blog and Chesapeake Capital website. How do you trade these? I can see these in interactive Brokers but the volume seems nonexistent for almost all contracts…despite Eurex and OneChicago reporting large volume.

You mentioned in your blog that CFDs are not good for trend following. I agree that the majority of the CFDs are pointless because the overnight interest kills you. I am using expiring futures-tracking CFDs that don’t charge interest, where the only cost is the spread, which is expensive but not a deal breaker (based on simulation and 3 month experience). What is your opinion on these? SaxoBank offers them.

I’d like to have a beer with you on my next trip to Vietnam.

Best regards from Qatar,

Thanks for the nice words.

I do try to give away a ton of free info across my blog and podcast, but my support I keep to my Flagship product here.

Instrument choice can be tricky. You need liquidity or trend following will not work. I do help clients with a full understanding of instrument choice options to trade needed markets.