Come Discuss Systematic Trend Following & Setting Up A Fund

Just a curious question for all the trend followers out there.

What are the most significant changes or rules that you have introduced to a trend following system that completely turned the system from an average one into one that is worthy to be traded?

I am asking because I am constantly looking for good ideas or just a general direction that I can take to be better at my trading. I believe this question will also be very helpful for the newbies out there too.
I remember the days when I was left excited but confused after reading Market Wizards as the interviews didn't go into the details of trend following. Since then, I have re-read that book many times to absorb every tiny clue that I may have missed, and reading other trading books on the same topic.
This has been a long journey for me (8 years) before I started to see my trading system turn into one that I believe is capable of matching the performance of some of the better CTAs.

So for me, the most important discoveries in my research are:
1) Simple rules/algorithms that systematically maximise winning trades.
2) Better position sizing rules to reduce risk and drawdowns.
3) Diversification. Diversification by trading time-frame and markets. This is the only free meal in trading.

Come share with us.

Cheers,
Andy
 
Stratos Capital said:
1) Simple rules/algorithms that systematically maximise winning trades.
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Andy, if trend following is your preferred methodology then I suggest you ask yourself … should “maximizing winning trades” really be my objective?
 
KCOJ said:
Andy, if trend following is your preferred methodology then I suggest you ask yourself … should “maximizing winning trades” really be my objective?
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Hi KCOJ.
Perhaps I should elaborate on what I mean by maximizing winning trades.

I mean to maximise the returns from winning trades in the sense that I scale into trades that are trending well and thus in my favour. This is consistent with what the original group of Turtles were taught by Richard Dennis and Eckhardt.

I don't mean maximising my win/loss ratio. As trend following strategies naturally tend to only win 30-40% of the trades they take.

Hope this clarifies.
 
Stratos Capital said:
What are the most significant changes or rules that you have introduced to a trend following system that completely turned the system from an average one into one that is worthy to be traded?
More...

Trend Following strategies aren't all the same are they? What methodology are you using to follow trends?
 
lovethetrade said:
Trend Following strategies aren't all the same are they? What methodology are you using to follow trends?
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I guess generally the entry rules for trend following are pretty much the same.

But I was thinking if anyone found an area that is particularly worth researching on. For example did anyone benefit from using better position sizing techniques like the Kelly Formula? Or integrated some Bayesian model.

Things that give their strategy an edge over the other trend followers. For example, I heard of CTAs that use standard trend following trading rules, but they get more alpha by using algorithms to manage their execution of orders.
 
I have a question for trend followers:
Trend following strategies seems to have entered into a serious drawdown since 2016, at least based on the medium term time frame. Is this normal? Because drawdowns in the past according to my data, usually don't last that long. The latest drawdown seems to be the worst ever for trend followers.

How many of you are still confident that trend following will make a comeback soon. And how many have seriously given up hope? I personally still believe very much in the strategy.
 
Stratos Capital said:
I have a question for trend followers:
Trend following strategies seems to have entered into a serious drawdown since 2016, at least based on the medium term time frame. Is this normal? Because drawdowns in the past according to my data, usually don't last that long. The latest drawdown seems to be the worst ever for trend followers.

How many of you are still confident that trend following will make a comeback soon. And how many have seriously given up hope? I personally still believe very much in the strategy.
More...

Try a multi time frame, multi instrument approach. Partially delta hedge your positions by selling short term options. If you are not married to trend following, consider adding other trading strategies such as reversion to the mean, daily statistically based trades, and the high probability range trading.
 
Stratos Capital said:
I have a question for trend followers:
Trend following strategies seems to have entered into a serious drawdown since 2016, at least based on the medium term time frame. Is this normal? Because drawdowns in the past according to my data, usually don't last that long. The latest drawdown seems to be the worst ever for trend followers.

How many of you are still confident that trend following will make a comeback soon. And how many have seriously given up hope? I personally still believe very much in the strategy.
More...
I think this is quite normal, and you can see this looking at CTA results or large trend following firms like AHL.

How is your work going? I am doing something similar, and coming to the same conclusions from a risk management perspective.
 
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