can you advise concerning eckhardt's method?
thanks in advance.
surf
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Althucher guesses: trend funds to disappear within the next 10 years...
- Thread starter marketsurfer
- Start date
can you advise concerning eckhardt's method?
thanks in advance.
surf
Quote from ananda:
"There are still good trends, but in most cases they are no longer good by the time that simple trend following "technical indicators" have cottoned on."
Cutten seems unaware that elementary backtesting of almost any trend following system shows parameters which would have ridden trends in metals, energies and other futures for two or three years recently.
With trends of such duration I wonder whether some of the participants of this thread will "cotton on" to the fact that "fading" such trends might be slightly less profitable than following them.
why do you suppose the deans of trend following missed these elementary parameters?
thanks,
surf
Quote from ananda:
I would be fascinated to know that myself. Perhaps you might call Dunn and JWH for me?
it seems obvious there is something fundamentally flawed in their systems presently, unless their luck has simply run out.
regards,
surf
ps. i note your location--- ever visit watchland?
http://www.thepurists.com/watch/features/jaw/wphh2003/index.html
Vishnu and Surf et al,
Here are results from an interesting research project which addresses long-term trend-following.
Cole Wilcox and Eric Crittenden of Blackstar Funds prepared a paper detailing a long-term trend-following strategy for stocks that bought all-time dividend- and split-adjusted highs and basically gave them room to run with a volatility-based trailing stop. Bottom line:
- it was more profitable than âbuy and holdâ on the S&P 500 in twelve of fourteen years;
- it was profitable on an absolute basis in eleven of fourteen years;
- the maximum drawdown percentage was less than half that of the S&P 500;
- fourteen-year compounded returns were 19.3% versus 12%;
- ending equity was over twice what âbuy and holdâ got.
Their paper is a PDF file/link below:
http://www.blackstarfunds.com/files/Does_trendfollowing_work_on_stocks.pdf
Here are results from an interesting research project which addresses long-term trend-following.
Cole Wilcox and Eric Crittenden of Blackstar Funds prepared a paper detailing a long-term trend-following strategy for stocks that bought all-time dividend- and split-adjusted highs and basically gave them room to run with a volatility-based trailing stop. Bottom line:
- it was more profitable than âbuy and holdâ on the S&P 500 in twelve of fourteen years;
- it was profitable on an absolute basis in eleven of fourteen years;
- the maximum drawdown percentage was less than half that of the S&P 500;
- fourteen-year compounded returns were 19.3% versus 12%;
- ending equity was over twice what âbuy and holdâ got.
Their paper is a PDF file/link below:
http://www.blackstarfunds.com/files/Does_trendfollowing_work_on_stocks.pdf
Quote from ananda:
"There are still good trends, but in most cases they are no longer good by the time that simple trend following "technical indicators" have cottoned on."
Cutten seems unaware that elementary backtesting of almost any trend following system shows parameters which would have ridden trends in metals, energies and other futures for two or three years recently.
With trends of such duration I wonder whether some of the participants of this thread will "cotton on" to the fact that "fading" such trends might be slightly less profitable than following them.
"Would have"? Of course, in hindsight it is easy to work out parameters that would have worked. But you don't make money from what would have worked, you make money on having to estimate the parameters that will work on future trends. The performance of trend following funds in the last couple of years shows that it has been quite difficult to estimate those parameters in advance.
If these funds are struggling with returns during a period with many well-defined trends, how will they do during a period with few trends, and lots of chop? Like any easily replicable system, the more people cotton on, the more the returns degrade and the higher the risk & volatility becomes. Trend following has been around for so long that the competition is reaching saturation point, and the strategy in its simple form (basic technical signals) may well be finished.
Note that I still think trends can be profited from. I just think that the simple technical methods of old, which Dunn, JWH and co seem to follow, are becoming increasingly unreliable. It is very rare for the results of easily replicable methods not to eventually degrade.
Quote from BrightPropGuy:
Vishnu and Surf et al,
Here are results from an interesting research project which addresses long-term trend-following.
Cole Wilcox and Eric Crittenden of Blackstar Funds prepared a paper detailing a long-term trend-following strategy for stocks that bought all-time dividend- and split-adjusted highs and basically gave them room to run with a volatility-based trailing stop. Bottom line:
- it was more profitable than âbuy and holdâ on the S&P 500 in twelve of fourteen years;
- it was profitable on an absolute basis in eleven of fourteen years;
- the maximum drawdown percentage was less than half that of the S&P 500;
- fourteen-year compounded returns were 19.3% versus 12%;
- ending equity was over twice what âbuy and holdâ got.
Wow that is scary. If the best they could do in HINDSIGHT is a 19% return imagine what they will get in actual trading!
Quote from Cutten:
"Would have"? Of course, in hindsight it is easy to work out parameters that would have worked. But you don't make money from what would have worked, you make money on having to estimate the parameters that will work on future trends. The performance of trend following funds in the last couple of years shows that it has been quite difficult to estimate those parameters in advance.
If these funds are struggling with returns during a period with many well-defined trends, how will they do during a period with few trends, and lots of chop? Like any easily replicable system, the more people cotton on, the more the returns degrade and the higher the risk & volatility becomes. Trend following has been around for so long that the competition is reaching saturation point, and the strategy in its simple form (basic technical signals) may well be finished.
Note that I still think trends can be profited from. I just think that the simple technical methods of old, which Dunn, JWH and co seem to follow, are becoming increasingly unreliable. It is very rare for the results of easily replicable methods not to eventually degrade.
It's good to see Cutten back again. Keep posting, the site has been sorely lacking any sort of perspective gained from experience in the markets.
Quote from jem:
I tell you right now why trend following is so hard... derivatives.
Derivatives make markets more noisy. Clean signals are harder to find, and because of he derivatives it seems me that the pullbacks in manyof these markes are deeper than they used to be.
This is a very good point. The hedges of derivatives, e.g. options, is very much trend following by definition. So even without the competition from trend following funds, it is likely that too many people are following the trends.
Quote from Bitstream:
market is arbed to death, that's why trends are gone. bots are designed to either trade ranges or arb somethin' and they are employed more and more by institutions. new etfs born every day sure dont help things.
yes. i believe this will eventually create flat/trendless ( even in hindsite) markets punctuated by extreme momentary, sudden moves caused by system shocks. per the trend followers results, we are well on our way to this situation.
regards,
surfer