I recently came across a statement on the web along the following lines: âOccasionally, someone trying to promote something or start a debate will argue that trend following rules must always change due to changing market conditions. This is nonsense. It is a specious argument.â Some well known trend following CTAs have indeed been quoted as saying that they still trade the same system as when they started out in business 20 or even 30 years ago. Well, yes and no. Let us take an example. Imagine that a CTA trades an ultra simple channel breakout reversal system: he buys when an instrument breaches an X day high to the upside, he reverses and goes short when the instrument penetrates an X day low on the downside. His position size for each trade is Y percent of total equity, based on the risk represented by the width of the channel. Now imagine that over the years, as markets change, the CTA increases the value of X in an attempt to avoid the increasing whipsaws and choppiness he sees in the market. He may also decide to increase the value of Y, perhaps proportionately, in order to keep a similar exposure to the market after the widening out of his stops. Let us also imagine that over the years, our CTA adds a bell and perhaps a whistle or two â perhaps he introduces sector and or overall risk limits, perhaps he introduces a way to reduce the risk from highly profitable trades, locking in some profit before the trend inevitable begins to reverse. Is the CTA still trading the same system at the end of the period as he was trading when he started out in his trend following career? Well yes, he is still trading a channel breakout reversal system. And no, the profile of his system is very, very different indeed from the way it started out. To emphasize the point, look at the many CTA disclosure documents out there. You are unlikely to find many which do not extol the benefits of continuing research and development. Of course they change their systems in the light of changing markets. Not to do so would be commercial suicide.