Following the Trend by Andreas F. Clenow

Author:Andreas F. Clenow
Language: eng
Format: epub
ISBN: 9781118410844
Publisher: Wiley
Published: 2012-11-10T05:00:00+00:00

HOW TO READ THIS CHAPTER

This is the longest chapter of the book and as it goes through the behaviour and performance of the strategy over the course of 22 years, it may feel like ancient history and cause you to wonder whether this is just a page filler. I can assure you that nothing is further from the truth. In my view, this chapter is by far the most valuable learning opportunity in the book and if you want to understand trend trading in depth, you should reflect on each year, looking at the details in the performance charts and trying to imagine what life is like for a professional trend trader.

What you are normally told in books and marketing material is that trend trading is easy and highly profitable. The study of the year by year behaviour and breakdowns on sectors and directions shows that although it is profitable in the long run and the trading rules are theoretically simple, it is far from easy to accomplish the results in real life. See this chapter as a reality check. It is my way of showing the real side of this business, the good and the bad, without overselling or overhyping. If you want to enter into the field of trend trading, read the book through once first. Then go back and study the details of this chapter again.

When you have settled on your own trading strategy, whether by constructing your own or modifying my core strategy, make realistic simulations and compare the details to this chapter, year by year and month by month, to see how your strategy would have handled things differently and whether it is still a viable way forward.

You simply cannot base your strategy-selection process just on simulation summary statistics or a long-term equity curve.

After this year by year review, in the next chapters I look more closely at how to replicate and reverse engineer existing futures hedge funds as well as how to further improve upon the core strategy.

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