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The Lack of Trends for Trend Followers in Managed Futures

There is much in the news regarding the “Death of Trend Following”. Anyone in the investment world knows that managed futures have been struggling the last several years. Actually in my opinion this is one of the hardest periods ever! I remember vividly 2005 and 2006 and thought those were tough, but this surpasses that in duration and depth of draw downs of many commodity trading advisors. While many threw in the towel then, those who stayed in the marathon of trend following were more than rewarded in 2007 and 2008. As much as Past Performance is not Indicative of Future performance; I personally believe whenever we have a contraction of volatility there will come a period of expansion of volatility. This expansion is what trend followers live for. Time will only tell when there will be trends and in which markets. The key to successful trend following is patience, discipline and strong risk management. Even with these, there are no ways to avoid losses or long draw downs such as we are in now….

Past performance is not indicative of future performance

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4 comments to The Lack of Trends for Trend Followers in Managed Futures

  • Guruprasad V

    Dear sir,

    I’ve a doubt. Markets have gone up by more than 100% from 2009. If trend followers are those who catch the trend, how come its possible for the trend followers to miss 100% upside that happened for the last 4 years. Are trend followers skewed towards short side of the trade? This is my doubt.

    • andrabr9

      It depends on which market you are referring to….I can speak for myself…I trade a diversified portfolio..I try to buy the strongest and sell the weakest…The stock markets have been on and off the strongest. Trend followers follow the trend…if markets are going up…and if they are the strongest on a relative basis…it is purchased…conversely on the shorts…Trend followers in managed futures have not done well due to the lack of trends. Again..this is over a broad group of markets…such as grains…energies…metals…softs…currencies..etc…

  • Diversified Trading Manager

    Guruprasad V. We have made very significant gains in equities since the trend began. Certainly, we have not missed the 100% upside. That being said, as a responsible, diversified manager we are careful to ensure that we have exposure elsewhere and that we are never over exposed to any one sector. This is what has caused the drawdowns for many.

    We have no long/short bias. If anything, there are other managers who lean long. I do not know of anyone who leans short.

    Doubts are a good thing. Keep asking and exploring.

    • andrabr9

      Thank you for your post…Yes there have been trends in the stock market. However as in all markets there will be periods that are choppy. That is why I trade a broad basket of markets from grains, metals, energies, softs, currencies…however these have all experienced lack of trends. Been a tough environment.

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