"Jim Simons is Correct About Trend-Following"

[carrer]

You can trade futures in such a way that your leverage is 1:1 (i.e. no leverage). It's all about position sizing. For example, if your account is 100k, and you trade a single ES future contract, the risk/reward/leverage would be roughly the same as trading the underlying stock index SPY with entire capital. In fact, you can deleverage your future trading to the point where it's less than 1:1.

You could if you have a large capital. But If you merely have enough to buy a contract or two, you can't.

 

[Sergio77]

Simons is right and those you that not agree are backtesting arcade players.

 

[i960]

There's really no reason to trade futures with 1:1 leverage anyway. Even if you stuck with 1:4 when's the last time you saw something move 25% in a single inescapable move?

 

[globalarbtrader]

There's really no reason to trade futures with 1:1 leverage anyway. Even if you stuck with 1:4 when's the last time you saw something move 25% in a single inescapable move?

VIX, a few weeks ago

21 to 27.5 is a 30% move I reckon.

Not sure what you mean mean by 'inescapable'; even if the move reverses as it did here the margin call would already have wiped you out.

OK diversification helps, you'd have been crazy to be trading all your money in near VIX at 4:1 leverage, but the main point is probably that different amounts of leverage make sense for different things.

GAT

 

[Visaria]

There's really no reason to trade futures with 1:1 leverage anyway. Even if you stuck with 1:4 when's the last time you saw something move 25% in a single inescapable move?

earlier this year, swiss franc debacle. a trend following hedge fund manager friend of mine was hit on his stops with massive slippage.

 

[i960]

earlier this year, swiss franc debacle. a trend following hedge fund manager friend of mine was hit on his stops with massive slippage.

Cmon, in a non pegged currency.

Don't over leverage yourself in bullshit is a given.

Inescapable means gaps. Meaning something you cannot avoid.

 

[EPrado]

Cmon, in a non pegged currency.

Don't over leverage yourself in bullshit is a given.

Inescapable means gaps. Meaning something you cannot avoid.

Yeah, a lot of people who got wiped out in that mess were FX traders who unwisely use the 500-1 leverage those FX shops give out. Yes the move was insane and unexpected,but still.....when you way over leverage an account in an instrument which can go berserk....well.....you are setting yourself up for something bad.

 

[Buy1Sell2]

Index futures are leveraged by default.

No--they aren't. It's the trader that decides if they want to be leveraged or not when trading index futures.