Category: Trend Following

A recent trend following take from Michael Covel.

This presentation (audio) once given by Bill Dunn is interesting. It goes along with the charts in the book “Trend Following”.

More.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Bernard Drury, a top trader, took a typical not so typical route to trading success. An excerpt from Futures magazine:

“So, how does this Russian language major do it? Not surprisingly, he attributes his success to lots of hard work and a little good fortune. Just out of Dartmouth College, Drury took a job as a trader in the grain markets at the Minneapolis Grain Exchange thinking the international aspect of trading would put his Russian skills to use. Though he never needed to speak the language, he grew more interested in the trading industry. His next job took him to Washington, D.C., where he worked as a writer analyzing the grain markets and how agricultural policies affected them. For more than eight years, he watched the grain markets and learned to anticipate certain responses to news and events, a skill that would come in handy later. “I was eager to get back to trading. So in 1990, I moved back to Chicago to trade for myself,” Drury says. It’s no surprise that he stuck to what he knew and traded grain spreads. “It was serendipitous that I chose to study for the MBA while I was in Chicago because, as part of a class project, I did research on the managed futures industry,” he says, describing how that in-depth look turned his attention to a new aspect of trading. “I am lucky I did that class project because it encouraged me to set up a CTA firm of my own.”

Today, Bernard has left the fundamentals behind and is a successful trend following trader.

From Trader Daily a good quick and dirty bio on Larry Hite:

“As a visually impaired, scholastically challenged kid growing up in Brooklyn, Larry Hite was never voted most likely to succeed — he didn’t even learn to read until the fifth grade. Only toil and sweat could have propelled the scrawny kid to greatness, and toil and sweat were out of the question. “I didn’t want to work for my money,” Hite, 64, says unapologetically. “I wanted money to work for me.” His game plan worked. The ideas Hite concocted in the 1970s and ’80s spawned empires and industries: Man Group, PLC, might not be the beast it is today — it’s one of the largest hedge-fund managers on the planet — had it not collaborated with Hite two decades ago on a revolutionary joint venture. Likewise, Hite forever changed futures trading in 1972, when he published a paper titled “Game Theory Applications” in The Commodity Journal, helping to usher in a new kind of quantitative speculating that masters such as Jim Simons now practice.”

See Larry in my film.

Eclipse Capital Management, a prominent trend follower, recently authored a white paper addressing performance. Their key conclusion was a nice academic way of saying, “stay in for the long term and don’t get out at the bottom!”

Their comment:

“By increasing one’s holding period, the investor reduces the probability of GMP [Global Monetary Program – a trend following fund] underperformance to a point where it is a minimal risk, while at the same time having the potential to participate in periods of substantial outperformance. This very attractive pattern is similar, but not identical, to that of call option – where the risk is limited and the upside unlimited.”
Eclipse Capital Management

Citigroup View of Trend Trading: Read (PDF).

An excerpt from recent SFO magazine article on trend following:

“The objective for any investor who wants to be active in the markets is quite simple. How does one make effective decisions in an uncertain and dynamic world? The problem is finding a generalized approach that will work effectively across a broad set of fast-paced asset markets. A realistic approach to decision-making should involve a methodology that reflects a functional world view or philosophy of how markets operate. This approach also should be replicable and tied closely to a system of management which can be structured in a variety of ways to fit a wide set of opportunities. Trend following is an efficient means of decision-making under conditions of uncertainty that reflects the peculiarities of asset markets that can be tailored to different time frames and risk profiles.”

Read full article.