Following the Trend

Foreword xiPreface xiiiAcknowledgements xvii1 CROSS-ASSET TREND FOLLOWING WITH FUTURES 1Diversifi ed Trend Following in a Nutshell 2The Traditional Investment Approach 4The Case for Diversifi ed Managed Futures 7Criticism of Trend-Following Strategies 8Managed Futures as a Business 10Differences Between Running a Trading Business and Personal Trading 12Marketability of your strategy 13Volatility profi le 13Subscriptions and redemptions 15Psychological difference 152 FUTURES DATA AND TOOLS 17Futures as an Asset Class 17Futures exchanges 21Futures and currency exposure 22Futures Data 24Dealing with limited life span 24Term structure 26Basis gaps 28Futures Sectors 30Agricultural commodities 31Non-agricultural commodities 33Currencies 37Equities 38Rates 39Required Tools 42A word about programming 42Development environment 42Data vendors 44Data storage 443 CONSTRUCTING DIVERSIFIED FUTURES TRADING STRATEGIES 45They Are All Doing the Same Thing 45Cracking Open the Magic Trend-Following Black Box 49Investment universe 52Position sizing 53Slippage, commission and other costs 56Interest on liquidity 56Strategy personality 56Anatomy of a trend-following strategy 574 TWO BASIC TREND-FOLLOWING STRATEGIES 61Strategy Performance 63Correlations between strategies 68Parameter stability 70Conclusions from the basic strategies 72Improving the Strategies 72Trend fi lter 73An improved stop loss mechanism 75Controlling the risk level 80Parameter stability check 84A solid foundation for futures trading 86Core strategy rules 875 IN-DEPTH ANALYSIS OF TREND-FOLLOWING PERFORMANCE 89Strategy Behaviour 89As a Complement to an Equity Portfolio 91Trading Direction 94Sector Impact 97Cash Management and the Effect of Free Government Money 101Putting Leverage into Context 1046 YEAR BY YEAR REVIEW 109How to Read this Chapter 1101990 1101991 1171992 1221993 1271994 1321995 1381996 1421997 1481998 1531999 1582000 1632001 1682002 1742003 1782004 1842005 1892006 1942007 2002008 2052009 2112010 2162011

Andreas Clenow CMT, is a principal at ACIES Asset Management with headquarters in Zurich, Switzerland, which he joined after having successfully established his own hedge fund. He specialises in developing and trading quantitative strategies across all asset classes. Prior to his role as a hedge fund trader he had a lightning career with Reuters, where he, as Global Head of Equity and Commodity Quant Modelling, was one of the youngest ever in such a role. He was also the Global Head of Institutional Charting and Technical Analysis for Equis International before departing for the hedge fund world.

"Following the Trend is an absolute must read for anyone with an interest in systematic trend following whether as an investor, trader, or aspiring manager. The book is at the same time comprehensive and easy to read. As someone who has designed these types of systems, it is absolutely clear to me that Clenow writes as a knowledgeable practitioner, not an armchair theoretician. I admired Clenow's repeatedly pointing out real life difficulties and drawbacks and his refusal to use optimization or well-chosen examples as virtually all other books of this type tend to do. In short, this is a real life presentation of the subject matter. In one particularly innovative chapter, Clenow creates close replications of some of the best and largest trendfollowing funds by combining his set of simple, non-optimized rules with variations in portfolio composition and volatility level." -- Jack Schwager, Author of Market Wizard and Schwager on Futures series and Market Sense and Nonsense