It just makes sense that the bigger the "bubble" involved, the higher the success rate of trend following and the ease of making money at it. Bigger/longer trends mean less degree/frequency of pullbacks. That's why the 70's probably had more successful traders at this approach. These days it's doable...just not as easy.
Why did trend following work well in commodities in 1970s but lost effectiveness later?
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Agreed, and when you have inflation, you have a large increase across virtually all commodities, so it doesn't take special timing necessarily like it does to catch 1-2 markets.
To get in on the discussion...
If trend following doesn't work... what does? There will always be trends.. it depends on your time frame (and hindsight) to see them as how they are.
We're in a long term uptrend, medium sideways, shortterm down.. 3 trends which are all correct. It's how you decide to enter and maybe even more importantly your exit.
If there's no trend, there's no movement at all. So, in low vol situations it is maybe harder to see trends, as there's less movement and less incentives to trade.
If trend following doesn't work... what does? There will always be trends.. it depends on your time frame (and hindsight) to see them as how they are.
We're in a long term uptrend, medium sideways, shortterm down.. 3 trends which are all correct. It's how you decide to enter and maybe even more importantly your exit.
If there's no trend, there's no movement at all. So, in low vol situations it is maybe harder to see trends, as there's less movement and less incentives to trade.
Trends will always stay the most profitable way of trading. The only problem is being able to follow that trend. More and more traders are not able anymore to take advantage of the trend. Trends still exist but changed over the years as more people have more tools available to trade. More people with more sophisticated tools changed everything. In the 70's , before computers were available, you could take a position and wait a few days before taking a good profit. Now markets move much faster. The changes of the behavior of the markets has liquidated a lot of "traders", only really good traders can still survive. So probably 75% of all traders were pushed out as non profitable. Trading was a hobby, now it is a job. So completely other (higher) qualifications are needed. In the 70's all my neigbours were "trading", now I am the only one left.
This thread makes the classic mistake of only looking at the past to make universal statements. Clearly you have to be with the "trend" to make $ directionaly trading-- but the problem arises is that prior to your entry, the past trend is meaningless and will trick most into believing it has value.
The world authority on trend following Mike Covel would disagree with you. He interviewed dozens of the largest and most succesful trend followers alive to reach the conclusion. what do you back your claims up with? Nothing? thats what I thought.
Anacreon
"The world authority on trend following Mike Covel"
1000 x LOL
1000 x LOL
Commodities had a huge multi year move in the early to mid 2000's along with stocks in that space.
1) DXY
2) China
3) Goldman Sachs... And Jimmy Rogers
Gold,oil,iron ore,nat gas, fertilizer, steel and some food related softs were in a bubble mania.
Potash was the new gold. The human race was starving, the price per ton was skyrocketing.
I opened a peat and manure collection facility in Ireland believing in the fed substitution model
that people would burn shit rather than fossil fuel and I would become rich.
Ah....if only all men in Africa would wear suits my clothing venture would have succeeded as well.
1) DXY
2) China
3) Goldman Sachs... And Jimmy Rogers
Gold,oil,iron ore,nat gas, fertilizer, steel and some food related softs were in a bubble mania.
Potash was the new gold. The human race was starving, the price per ton was skyrocketing.
I opened a peat and manure collection facility in Ireland believing in the fed substitution model
that people would burn shit rather than fossil fuel and I would become rich.
Ah....if only all men in Africa would wear suits my clothing venture would have succeeded as well.