Stonehenge Asset Management's Steven Michael on why trend following isn't over yet.
When the CTA industry began in the late 1970's almost every
CTA followed long-term trends. As the industry developed, so
did the strategies that CTA's offered to investors.
Today, you can broadly say that CTA's - with the exception
of high-frequency low latency models and fundamental macro
strategies - are one of two categories: trend following or mean
This is, of course, a simplistic view and there are many
ways to be trend following. There are many trade durations
amongst trend followers and many ways to define a trend.
I do not believe in the concept of defining a trend and
prefer to call it "quantitative momentum trading". I am betting
on historical statistical movements up and down in the markets
which repeat themselves over time. Importantly, fundamentals
play no role.
You could choose many different methods of choosing your
entry and exits which will determine your success. Because us
momentum traders are relying on historical statistical patterns
in movements repeating themselves over time, sample size is
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