Trend following and the pain of low volatility
Markets tend to move in cycles and there is an unlimited amount of more or less successful strategies in the markets trying to cope with these cycles. Currently trend followers like us are having hard times as there is no or no significant trend in place. It is as hard for the manager as for the investor because you question your models more than once a day.
Experience tells us that we have had those situations in the past and they were usually followed by very significant moves. The point is you don’t switch off your trend following model when you have trendless times as you don’t know when the trend season starts again.
Many trend following models have a very strong long-term track record and usually outperform the negative non trending phases significantly. We do strongly believe in trend following strategies in any asset class as it is a natural pattern for most of the investors in financial markets.