Following the Trend, 2nd Edition

CHAPTER 7Counter‐Trend Trading

It seems so far as if the age‐old concept of trend following still works. Sure, it's not as easy sailing as it once was, but it still provides attractive long‐term results, beating the markets both before and after risk adjustment. Declaring trend following dead every couple of years has become a national pastime and it's getting quite hard to take such assertions seriously any more. But that doesn't mean that trend following is the only game in town or that you should focus solely on this or any other specific strategy style.

This book is primarily about trend following but I would also like to add some value to you readers by showing different approaches. The most obvious alternative to futures trend following would be to flip the cards and go full counter‐trend. A dip buying strategy is by definition against the trend and does pretty much the opposite of what we have been seeing in this book so far. It probably sounds counter‐intuitive that a book about trend following should discuss counter‐trend models, at least if the purpose is other than to trash them.

My personal view is that it's very dangerous to identify yourself with any specific trading strategy or even market philosophy. Trend following is a tool, just like quantitative trading is a tool, and so is the futures market. Focusing on something may be a good idea in that you can get better at something that you spend a lot of time and energy doing, but you shouldn't reject other methods ...