John Henry--The Next Blow Up ??

[PacksNBundles]

Quote from jay gould:

exactamundo. there in is the inherent flaw in the trend approach for the average capitalized trader. it is my contention that it takes large sums of capital to properly diversify to catch the 5% of the time the trade is profitable--- and to withstand the drawdowns the trend followers say is part of their method.

once again, if there is no way of knowing if a trend will continue, and trend followers accept 35% plus drawdowns, what's the difference between "trend following" and buy and hold??

respectfully,

JG--financier

The difference is correlation. People who use managed futures, don't use them as their primary asset allocation, but rather as part of their asset allocation. Managed futures, especially trend following, has very little if any correlation to the mkt as a whole.

I believe Aaron Schindler himself published an article demonstrating how despite the drawdowns of buy and hold and the drawdowns of managed futures, when combined, they produce similar positive equity curves with smaller drawdowns. Do you understand now?

 

[jay gould]

Quote from Maverick1:

How large was VN's fund when he blew up in 87' then 98'? can someone post the numbers please. Then how large is his fund now? Anyone?

Dr. Niederhoffer experienced a loss of aprox 50 million in 1997. I am not sure about 1987, or even if losses occured in this year.

respectfully,

JG

 

[jay gould]

Quote from PacksNBundles:

The difference is correlation. People who use managed futures, don't use them as their primary asset allocation, but rather as part of their asset allocation. Managed futures, especially trend following, has very little if any correlation to the mkt as a whole.

I believe Aaron Schindler himself published an article demonstrating how despite the drawdowns of buy and hold and the drawdowns of managed futures, when combined, they produce similar positive equity curves with smaller drawdowns. Do you understand now?

Correct. Managed futures should not be used as primary asset allocation.

Wrong-- Trend Following ( by definition ) is totally correlated to the market--- market goes up, long trend funds profit, market goes down, short trend funds profit and vice versa.

i dont believe, Mr. Schindler, who has my utmost respect, is a "trend follower". He was mentored by Mr. Monroe Trout who in turn was mentored by Dr. Niederhoffer.

Furthermore, when Mr. Schindler talks about managed futures--I highly doubt he is refering to the "trend following" tactic used by some CTA's.

respectfully,

JG

 

[PacksNBundles]

Quote from jay gould:

Correct. Managed futures should not be used as primary asset allocation.

Wrong-- Trend Following is totally correlated to the market--- market goes up, long trend funds profit, market goes down, short trend funds profit and vice versa.

i don't believe, Mr. Schindler, who has my utmost respect, is a "trend follower". He was mentored by Mr. Monroe Trout who in turn was mentored by Dr. Niederhoffer.


respectfully,

JG

How is trend following correlated to the mkt? For one, they trade over 40 different mkts. Some are going up, some are going down, some are going sideways.

And when you say long trend funds, that doesn't exist. Funds are not classified as long or short trend funds. They are simply trend funds. So if the mkt is trending up, they make money. If the mkt is trending down, they make money.

Buy and holders only make money when the mkt goes up and they are primarily index or stock positions. Trend followers trade bonds, currencies, grains, metals, indexes, and ag products. These products are not correlated to anything else except the index products. So you are not correct in this matter.

 

[yenzen]

Quote from PacksNBundles:

How is trend following correlated to the mkt? For one, they trade over 40 different mkts. Some are going up, some are going down, some are going sideways.

And when you say long trend funds, that doesn't exist. Funds are not classified as long or short trend funds. They are simply trend funds. So if the mkt is trending up, they make money. If the mkt is trending down, they make money.

Buy and holders only make money when the mkt goes up and they are primarily index or stock positions. Trend followers trade bonds, currencies, grains, metals, indexes, and ag products. These products are not correlated to anything else except the index products. So you are not correct in this matter.

Why bother arguing with this charlatan. He is a disciple of VN and he basically regurgitates whatever his master tells him to. Oh and he tries SO hard to sound sophisticated.

Senor Zen

 

[Aaron]

Quote from PacksNBundles:

I believe Aaron Schindler himself published an article demonstrating how despite the drawdowns of buy and hold and the drawdowns of managed futures, when combined, they produce similar positive equity curves with smaller drawdowns.

You can refer people to the <a href="http://www.schindlertrading.com/index.php?page=diversification"> Diversification page</a> on the Schindler Trading website to see this. The graph shows how a 10% allocation to the Schindler Trading Program in an S&P 500 (buy and hold) portfolio actually <i>reduces</i> the drawdowns and volatility of the portfolio as a whole while improving the returns &#9472; even though the Schindler Trading Program has had deep drawdowns and high volatility on its own.

As you and Jay Gould both know, it is all because of the non-correlation.

EVERY investor should have lots of equities (diversified across sectors and countries), some real estate (a home or REITs), some bonds (more as you get into retirement) and some managed futures. Maybe a house price bubble pops, or equities go into a bear market, or the managed futures have a big drawdown &#9472; because these asset classes are rather uncorrelated, the other assets should take up the slack and you'll continue to grow wealth in a steady way over time, regardless of bubbles and drawdowns.

Wealth creation is not about shorting Google at exactly the right time, it's about diversification with regular rebalancing. Shorting Google is just what we do with our play money because the actual wealth creation process is slow and boring.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.

Aaron Schindler
Schindler Trading

 

[jay gould]

Quote from PacksNBundles:

How is trend following correlated to the mkt? For one, they trade over 40 different mkts. Some are going up, some are going down, some are going sideways.

And when you say long trend funds, that doesn't exist. Funds are not classified as long or short trend funds. They are simply trend funds. So if the mkt is trending up, they make money. If the mkt is trending down, they make money.

Buy and holders only make money when the mkt goes up and they are primarily index or stock positions. Trend followers trade bonds, currencies, grains, metals, indexes, and ag products. These products are not correlated to anything else except the index products. So you are not correct in this matter.

i beg to differ, my friend. however, i should rephrase--- "when a trend fund goes long a market, and that market goes up, profits result." that is a 100% correlation for that fund in that market.

i think our definition of market differs--- i am speaking of the individual market itself and the correlation of the trend following tactic to the individual market.

remember, there can be "Sell and Hold" as well as "Buy and Hold" I should have been more clear--when i said "buy and hold" is the same as trend following, please include 'sell and hold". it's the "hold" part that is important and in clear evidence based on the drawdowns of trend followers.

respectfully,

JG

 

[PacksNBundles]

Quote from jay gould:

i beg to differ, my friend. however, i should rephrase--- "when a trend fund goes long a market, and that market goes up, profits result." that is a 100% correlation for that fund in that market.

i think our definition of market differs--- i am speaking of the individual market itself and the correlation of the trend following tactic to the individual market.

remember, there can be "Sell and Hold" as well as "Buy and Hold" I should have been more clear--when i said "buy and hold" is the same as trend following, please include 'sell and hold"

respectfully,

JG

If a trend following fund only traded one mkt, then yes, you would be correct. There is 100% correlation to that mkt. I believe this is obvious. But no trend following fund does that. They trade many mkts. And all these mkts are not correlated to each other.

Take a person who is long only stocks. Granted they may be invested in different sectors and industries, but if the mkt as a whole were to go south, most, if not all of their stocks would probably go down. This is not true of trend followers. A trend follower might be long bonds now as well as being short the dollar and long oil. These mkts clearly are not correlated with each other directly. That is my pt.

Hence, trend following funds have zero correlation with stock portfolios.

 

[jay gould]

Quote from PacksNBundles:

If a trend following fund only traded one mkt, then yes, you would be correct. There is 100% correlation to that mkt. I believe this is obvious. But no trend following fund does that. They trade many mkts. And all these mkts are not correlated to each other.

Take a person who is long only stocks. Granted they may be invested in different sectors and industries, but if the mkt as a whole were to go south, most, if not all of their stocks would probably go down. This is not true of trend followers. A trend follower might be long bonds now as well as being short the dollar and long oil. These mkts clearly are not correlated with each other directly. That is my pt.

Hence, trend following funds have zero correlation with stock portfolios.

I understand what you mean.

have a good night !

JG

 

[trade-ya1]

Hi all,

I think the difference between 'buy and hold' and trend following is that buy and hold simply implies no change at all to the core position. In other words, if one is truly following a buy and hold (or sell and hold) strategy, there should be no change to the position regarless of market conditions, change in trends, even fundamentals. Some 'long-term' investors have altered the 'buy and hold' strategy to mean, buy and hold unless fundamentals change. This is not truly buy and hold but, rather, buy and hold subject to changing conditions (which is obviously not really buy and hold). Trend following on the other hand implies that positions will be adjusted and even reversed based upon the direction of the trend. The determination of the time-frame of the trend is a matter of personal taste, risk tolerance and interpretation of the direction of the current trend in the context of your particular time-frame of choice. Best, Neal.