It’s Still Mean Reversion

An email came in:

I think there is a problem here with naive trend following using the daily data. Even if crude goes to the moon, say $100, and you capture the $50 by trend following, one would need a million dollar account to ride one contract very comfortably on daily data. On the other hand, if one wasn’t so concerned about big picture direction and trend followed shorter duration moves long and short in the hourly data, one could comfortably trend follow crude oil with a much smaller account (or larger position with the big account).

Of course it is not impossible to be a short term trader. There are simply trade-offs. Transactions costs are a big issue. Trying to be Jim Simons is an issue. Mean reversion is worth considering too.