AQR Hedge Fund moving into Trend Following

Quote from JezLiberty:

Blow-up: see Amaranth, LTCM, Niederhoffer, etc. basically holding positions that go the wrong way and keeping holding until the losses are too big that they "blow up" and force you to unwind the position and close the fund.

Typically happens with Option-writing strategies: look (very) good until they blow up by a Black Swan event.

This never happens with Trend Following thanks to the use of stop losses - of course there can also be large drawdowns resulting from many small losses, but the art of Money Management is to make sure that these strings of small losses keep you in the game until the next big moves..

Not sure that Dunn, JWH, Chesapeake, Abraham, Eckhardt, etc. use anything else than Trend Following at the root of their strategy...
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So you are talking about drawdown leads to margin calls and bust-up?

TF can also lead to intolerable drawdowns, imagine you hold 100 securities and they all stop loss at the same time.

So it's not TF vs. non-TF, it's the risk management that's the key.
 
Quote from JezLiberty:

mizhael, this is due to the excess kurtosis in the price distribution - the basis for Tend Following - see more on this discussed here:
http://www.automated-trading-system.com/why-trend-following-works-look-at-the-distribution/

Or to see performance of some random systems:
http://www.tradingblox.com/forum/vi...ghlight=&sid=67e64e35c09e76c1744e76aeab1bcda1
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We need to be careful about the "random" here.

Do we know the distribution of the random number generator or not?

If we know the distribution, then of course we can make money.

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Has anybody really tried his/her money using the random TF?

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And for serious TF, what's a good method of trailing-stop to use?

Percentage off from the peak? Why did you use 3-ATR in your post?
 
True risk management is key, but it is "sort of" embedded in Trend Following strategy, ie cut your losses short and let your winners run
 
Quote from mizhael:

We need to be careful about the "random" here.

Do we know the distribution of the random number generator or not?

If we know the distribution, then of course we can make money.

--------------------

Has anybody really tried his/her money using the random TF?

--------------------

And for serious TF, what's a good method of trailing-stop to use?

Percentage off from the peak? Why did you use 3-ATR in your post?
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That TradingBlox post is not from me but I think the main point is to show that the "prediction power" of an entry signal is less important than how you manage your position
 
Quote from JezLiberty:

Thanks for the links - Covel's sites are usually the "go-to" place to get preliminary info indeed...

I did a quick lookaround but could not easily find where they report their performance (I ususally check iasg or AutumnGold and they did not seem to have it) while Graham Capital website requires a registration.[/url]
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June numbers trickling in... I'm hearing Dunn and Winton up, Transtrend flat, Graham and C'peake down.
 
Quote from mizhael:

So it's not TF vs. non-TF, it's the risk management that's the key.
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There is TF, there is mean reversion, there is "statistical arbitrage" and scalping.

Did you ever develop a scalping method in a trend market ? Makes you not only " a bit" of money.
 
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