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  • Trend CTAs Have Failed To Outperform The Simplest Momentum Strategy February 28, 2023

    Trend-following CTAs delivered exceptional performance last year due to rare economic conditions that created favorable conditions for their strategies but in the last 22 years have failed to outperform the simplest momentum strategy. After a “lost decade” from 2009 to 2018, ...

  • Trend-Follow Stocks With Breakouts or Moving Averages? Norgate Data Provided The Answer February 25, 2023

    We used the Norgate Data price series for Russell 3000 stocks with current and past constituents to determine whether breakouts or moving averages provide the most robust trend-following signals. When backtesting trading strategies for stock index constituents, it is necessary to ...

  • Chasing Rare Outliers in Trend-Following. Is It Worth it? February 23, 2023

    Occasionally, rare outliers are delivered by the markets. Should the long-term performance of a strategy depend on catching those rare outliers? Our answer is “No”. Before we get a bit mathematical and present simulations, let us use some common sense. It is ...

  • Managed Futures Trend-Following Hype Vs. Reality February 22, 2023

    Where can we draw a line between hype and reality in managed futures? A few thoughts. After a lost decade, from 2009 to 2018, managed futures trend-following delivered solid gains and the best performance since 2000 last year. The SG Trend Index ...

  • Highest Correlation of Trend-following CTAs with the US Dollar February 18, 2023

    The correlation of trend-following CTAs with the US dollar is at its highest level in 23 years. A 2x-leveraged long US dollar position has replicated all of the gains of trend CTAs in the last two years. Although the long-term correlation ...

  • Ranking Stocks For Trend-following February 17, 2023

    We compare two popular ranking methods for trend-following stocks. We include examples with results for small and large caps. Read the article with a Trend-Following subscription.

  • Inflation Update and Correlation With Equities February 16, 2023

    Inflation paused in January. The long-term correlation between inflation and large caps is close to zero but with high variability. Based on the most recent CPI data from January of this year, there is no sign that inflation is dropping quickly. Depending ...

  • Recency Bias Affects Many Traders and Market Analysts February 10, 2023

    Traders and analysts focus on recent price action, and often they may think there are irregularities. In most cases, historical analysis shows there is no deviation from normality, and the perception of irregularities is due to recency bias. Recency bias is ...

  • Combining Trend-Following and Mean-Reversion February 6, 2023

    The ensemble of trend-following and mean-reversion strategies boosts the Sharpe ratio significantly due to a low correlation of returns and lower volatility of the ensemble. The trend-following and mean-reversion strategies are based on the same algo, the PSI5. The trend-following strategy ...

  • A Significant Regime Change February 2, 2023

    Gains in the US stock market from regular trading hours since January 2022 turned positive, while there are still significant losses from overnight changes. A regime change has occurred. In an article last month, I argued that the overnight effect is ...