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Futures TF

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Updated (weekly) after the close of Friday, March 21, 2025 (backtest)

  • The strategy is down 10.5% year-to-date.
  • The drawdown from equity highs is 14.8%.
  • There are 14 open positions, 9 long and 5 short.

Trend-Following Subscription

Access trend-following premium articles and the rules of a futures trend-following strategy with a Trend-Following subscription. The strategy trades the same markets with the same parameters.

 

 

Details of the strategy used in these daily reports

Timeframe: Daily
Data: 23 continuous, back-adjusted futures contracts.
Strategy Type: trend-following based on breakouts, exit long, and reverse to short with stop-loss.
Maximum positions: 23, long or short.
Position size: Based on stop-loss and maximum risk per position.
Trade entry: All trades are executed at the opening of the next bar.
Stop-losses: All stop-losses are executed intraday.

Backtest results are updated weekly after the close of the market. Backtest range: 01/02/1990–03/21/2025

The Risks of Trend-Following Strategies

Trend-following strategies attempt to capture long-term market trends, also known as outlier trades. The implementation of stop-losses results in a low win rate as the strategies exit with a loss until the onset of a trend. This style of trading can be extremely rewarding over the long term, but it is hard and could lead to a loss of discipline in the short term.

Trends and trend following are not the same thing, and many confuse the two. A trend-following strategy will not identify trends where there are none. From 2004 to 2016, or 13 years, the annualized return of the top 20 CTAs was 2.4%. However, the dispersion in CTA returns is high, and it is not reflected in the averages. There is a high specific risk in choosing a CTA or a trend-following strategy due to the huge optimization space. 

Furthermore, proper execution of trend-following strategies with many futures contracts requires sufficient capitalization. For about 20 contracts, the approximate initial capital is probably around a million dollars. Otherwise, due to insufficient capital, a strategy could miss a few profitable trends, negatively impacting the Sharpe and MAR ratios.

Trend following is a volatile style of trading with large equity swings. This style of trading is not for everyone. 

Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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