Niederhoffer on RocknRoll, mike Jackson & Trend Following

[Trend Following]

Quote from marketsurfer:

what is the return needed to recoup a 43% loss?

Not small. But most of the big trend following names have faced this exact same DD or greater since 1970. It is much harder to come out of these declines as a index buyer. Witness Nikkei and Nasdaq over the last 20 years and 10 years respectively. Comparing index declines and trend following declines might not be a fair comparison...for the index buyers!

 

[marketsurfer]

Quote from Trend Following:

In a general sense trend following drawdowns come from "guessing" wrong. "Guessing" with risk management is trend following. And that makes much more logical sense over predicting with no risk management (typical mutual fund portfolio).

my point exactly, happy we agree. however, these drawdowns are not indicative of "money management" rather hold and hope.

the proof is in the pudding.


surf

 

[marketsurfer]

Quote from Trend Following:

Not small. But most of the big trend following names have faced this exact same DD or greater since 1970. It is much harder to come out of these declines as a index buyer. Witness Nikkei and Nasdaq over the last 20 years and 10 years respectively. Comparing index declines and trend following declines might not be a fair comparison...for the index buyers!

good point. i hope Baha is able to pull out of the downward spiral.

best,

surf

 

[Trend Following]

Quote from marketsurfer:

my point exactly, happy we agree. however, these drawdowns are not indicative of "money management" rather hold and hope.

Trend following DD's come from many small losses added up in trend-less or whipsaw markets. They don't hold and hope, they cut their losses. However, if you cut losses those losses can add up -- hence drawdowns.

 

[Thunderdog]

While many of us here have at one time or another been guilty of holding on to a bad trade, surf is guilty of holding on to a bad trader.

 

[Wayne Gibbous]

http://www.dunncapital.com/Comp.pdf

 

[trendlover]

Quote from marketsurfer:

my point exactly, happy we agree. however, these drawdowns are not indicative of "money management" rather hold and hope.

the proof is in the pudding.


surf

No, not because of "hold and hope". The fund can have bets in futures contracts worth much more than the (actual) money put in that bet. Average 30% margin to equity. So if a price moves a little, it can make a big draw down. So it is not buy and hold that make a drawdown, but leverage. That is the risk, and that fund does not hide that risk. The same way that leverage can make a big draw down, that leverage can make a big winner.

 

[EPrado]

Surf does not realize that TF's enter once they believe the trend is in place and have stop losses set below/above. There is no "hope" going on. Not sure why Surf can't seem to pick up on this concept.

 

[Thunderdog]

Quote from EPrado:

Surf does not realize that TF's enter once they believe the trend is in place and have stop losses set below/above. There is no "hope" going on. Not sure why Surf can't seem to pick up on this concept.

I think it may have something to do with surf's love and need for attention. I think this is the bond that unites him and VN.

 

[Rodney King]

Quote from Wayne Gibbous:

http://www.dunncapital.com/Comp.pdf

If one were given this chart with no identifying markings on the two series, and had no axe to grind (as I don't), one would back-of-the-envelope it as "both series drifted higher for the ~30 years up to ~2003, and have been flattish for the ~6 years since."