Market Decoupling a Positive Sign for Futures Managers

Discussion in 'Trading' started by AFJ Garner, Jan 18, 2013.

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  1. Trends are starting to come back into play. What we’ve seen the past few months has been a slow turnaround in the managed futures performance across most funds. The problem in the past years has been the single-mindedness of the markets. At any given time, a single overwhelming worry has been driving the markets. The reason it self has varied. Sometimes everything is driven by the fear of this one factor. At other times by the relief of the perceived lessening of the same factor.

    As the global markets have been pushed between two extreme views, correlations increased. In the managed futures games, correlations is the enemy. At times correlations can generate large returns in short time periods. But more often than not, correlation is what steals your money.

    Let me first show you were the trend followers stand at the moment. Then we’ll look at how the correlations have changed.

    The December performance was overall on the positive side, albeit not by much. I have written before about the increasing danger that this low yield environment poses to trend followers. Most standard position sizing algos will take on larger and larger positions in this environment. Most standard trend systems keep buying the breakouts as if it’s business as usual. Following this method means blindly accepting an asymmetric risk to the advantage of the guy on the other side of the table. Trend followers who stuck to default systems got hurt badly last year.

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  2. Baron

    Baron ET Founder

    If you're going to contribute here then contribute and stop spamming us with your blog.
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