Is classical Trend Following still alive?

[Specterx]

Of course trend following is alive - there are hundreds of CTA funds and managers. Whether it makes money is a different story entirely.

All of the data and inputs are public and the strategies are trivial to replicate, so we're at the point where Wall Street analysts publish estimates of CTA buy/sell flows based on price level takeouts. There are also "managed futures" strategy replication ETFs. Unsurprisingly, with a space this crowded, returns have collapsed and the typical CTA grossly underperforms buy-and-hold, even worse when taxes and fees are factored in.

 

[Slope Trader]

Billion of dollars is run with trend following in London.

https://www.man.com/maninstitute/keep-calm-carry-on-trend-following

Man group who own AHL are a ftse 250 company. I think they were in the ftse 100 at one point.

.

That discussion was interesting especially because it was so recent, and they showed some useful charts too.

 

[zghorner]

One can't help but think of Richard Dennis and Eckhardt in this thread...legends.

And I agree you need size to trend trade...at least in my experience...as well as a pretty loose SL and excellent pain tolerance.

"If it feels good, don't do it" - Richard Dennis

It seems to me that trend following is more amenable to large size, so that could include hedge funds but I don't know what they typically do.

My own experience with trend following is a win rate more like 44%. You can't miss any signals because you never know when the big moves come to make up for the majority of losses.

In my journal, here, I'm currently weathering 11 losses out of the last 12 calls. We will find out if trend following still works. Meanwhile drawdown and losses are within statistical expectations.

I'm pretty sure the Turtles proved that trend following works with commodities. Before that Darvas proved it works on stocks.

 

[ironchef]

Billion of dollars is run with trend following in London.

https://www.man.com/maninstitute/keep-calm-carry-on-trend-following

Man group who own AHL are a ftse 250 company. I think they were in the ftse 100 at one point.

These guys basically said trend following worked for them. Didn't define their trend following method so we don't know if they follow @Slope Trader's definition of trend following.

@ZBZB, one puzzle I have, their trend following failed during that major reversal. Most trend followers from Schwager's book made a killing during a major/sharp reversal. What trend following method are they using?

 

[TrAndy2022]

BTFD or buy the dip on SP500 or Nasdaq100 works always. Just follow the trend here with some leverage and you can make it. Such a stock index going long is a certain bet while over 90% of stocks do not beat the buyandhold approach of these indices on the longterm side. You can also apply 200d moving average to exclude bear markets if you are funny enough. To get the true fun you need to scale in on your winning trade so you can max. returns. If your Risk:Reward is 3 it means 20 times your risk with scaling in. If your Risk:Reward is 6 it means then 400 times your risk as return. And you can also time the dips in their size. Whenever there is larger dip in the SP500 then the next dips are usually max. half of their size or even lower. That way you can make a lot over the years just by trend-following the main stock indices utilizing it with some leverage too. It also works on large growth stocks with LEAPs, buying calls, where you can double the investment on every 25% to 33% growth of the underlying stock. If the stock then triples over some years it means for you that you already could double your trend-following investment at least 4 times to maybe 6 times, which is then up to over 6000% return in a few years. Myself I am holding some Leaps on Nasdaq100 too, just trend-following the great bull market here. You can do it too.

 

[tomkat22]

And I agree you need size to trend trade...at least in my experience...as well as a pretty loose SL and excellent pain tolerance.

Why,to be a cushion for massive drawdowns? (cough,cough,Cathie Wood,cough,cough)

 

[ironchef]

And I agree you need size to trend trade...at least in my experience...as well as a pretty loose SL and excellent pain tolerance.

Why? My thought is the opposite, if my size moves the market, I change the trend. To be successful as a follower, I need to blend in and be part of the herd, avoid been the target of those predators (MM).

As for your second point, many of the wizards said you need to fear losses, get out asap if it is against you.

 

[zghorner]

Why,to be a cushion for massive drawdowns? (cough,cough,Cathie Wood,cough,cough)

Price fluctuates. Larger the time frame, larger the fluctuation.

 

[ZBZB]

These guys basically said trend following worked for them. Didn't define their trend following method so we don't know if they follow @Slope Trader's definition of trend following.

@ZBZB, one puzzle I have, their trend following failed during that major reversal. Most trend followers from Schwager's book made a killing during a major/sharp reversal. What trend following method are they using?

Ask the member of this site who used to work at AHL. He has a very long thread on his trend following.

 

[Zwaen]

If you define trendfollowing as captering a (part of) a move, up, down, or sideways due to macro-, micro- and geopolitical factors, then I think this would always have some place because this will always be present in asset classes.

Nice theoretical answer which doesn't print a dollar for ya