Year by Year Review

The strategy we have arrived at is already on a par with what most CTA funds and futures managers are able to produce. In its current shape it is quite usable for managing money, although it is certainly possible to improve upon it further. What we have now is a core strategy that is very similar to the base strategy of most trend-following managed futures funds and as such it has its merits. To be able to make intelligent decisions regarding what should be further enhanced with this strategy you need to properly understand how it really behaves and this is an extremely tough insight to build. There is no substitute for experience in this regard and having seen a strategy perform in the wild is the only way to gain a complete understanding of what it is capable of. But in lieu of that, in this chapter I try to paint as clear a picture as I can of what it would have been like to manage this strategy as it stands over a longer period of time.

It is clear that certain years are more interesting than others. Some years everything is just plain old business as usual with not much action going on, but in other years there may be large swings and important analytical conclusions to be drawn. I go over the 22 years from 1990 to 2011 and explain what happened, what went right and what went wrong. If things looked easy when you saw the overview simulation data in the previous chapters, this chapter will highlight where the difficulties can come in.

In the following ...

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