Why did trend following work well in commodities in 1970s but lost effectiveness later?

[Truman Kover]

From Monday September 5, 2016:

I've just remembered my new years resolution. Never [get] involved in a pro/anti trend following argument.
...

This thread belongs in the forum for Politics & Religion.

 

[Buy1Sell2]

In order to profit from trading and investing, prices must trend. This includes selling option premium. Trends exist in every trading/investing vehicle. Always have, always will.

 

[helpme_please]

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.

I guess the reason is that trend following got harder to trade after the 1970s. This is why even the Father of the Turtles faltered even though some of his Turtles continued to do well. You would have done well if you were one of his Turtles.

 

[Mtrader]

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.

Past trend is not important.
What is important is: what made this trend start? There are many factors that have influence on whether a trend will develop or not. You should analyze these factors behind the trend, not the trend himself.

 

[bogitrade]

I have a feeling you're not familiar with the industry. Speak to anyone active in the CTA business -- s/he will confirm what I told you.

You must read Fooled By Randomness because you are fooled by randomness.

 

[bogitrade]

That's what Covel's been saying for years -- gotta have some trendfollowing in your portfolio, to hedge rising rates / inflation.

...and lose money in the last 7 years inflation and rates are low. You are fooled by randomness.

Covel is a remnant of the 1980s.

 

[Chuck Krug]