Anyone abandoning trend following and/or dual momentum approaches?

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steve321
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Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
bornloopy
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by bornloopy »

steve321 wrote: Sat Aug 08, 2020 6:21 am I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
You are not approaching market psychology correctly.
I followed the greatest advice I came across and below I pasted a post I made on a different website forum.
I have made >200% returns over less than the past one year as such. I can show “proof”. Market timing worked great for me.

The following is taken from the most important twitter thread an investor could ever come across (links at bottom):
Druckenmiller's first mentor, Speros Drelles, would often tell him that "60 million Frenchman can't be wrong." Here's a thread on what that means and how to know when you should listen to or ignore the "Frenchman" (market):
Drelles was teaching the young Druck about the wisdom of the market, which is based on the idea that the crowd is collectively smarter than any one individual. This collective intelligence was first stumbled upon by the late great statistician, Francis Galton, who in 1906 observed a competition at a local fair where approx. 800 people tried to guess the weight of an ox. To his surprise, the avg of all the guesses was 1,197lbs. The real weight... 1,198lbs.
Countless studies have been done since. All show similar results. Crowd is better than any individual. Scott Page, in his book "The Difference", lays out the "diversity prediction theorem" to explain how this works and what variables are needed to make a crowd wise.
The theorem states that: Collective error = avg individual error - prediction diversity
The implications of this are 3-fold:
1. A diverse crowd will always predict more accurately than the avg individual
2. A crowd is often smarter than even the best of its individuals
3. Collective predictive ability is equal parts accuracy & diversity
Takeaway: Crowds are smarter than any single person, as long as there's a diversity of opinion. This theorem is based on math and is always true.
To take this back to markets. Here's Soros explaining why it's KEY to know when to be a part of the "herd" (ie, follow the trend) and when to disengage & be a contrarian:
Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd; I am liable to be trampled on. Most of the time I am a trend follower, but all the time I am aware that I am a member of a herd and I am on the lookout for inflection points. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.
You want to be a trend follower when there's a lot of people saying "this move makes NO SENSE" and a contrarian when people are saying "this makes so much sense". This is why a bull climbs a wall of worry & a bear falls down the stairs of hope. Trends are driven by (dis)belief
But... and this is important. You ONLY want to be a contrarian once the tape STOPS confirming the consensus narrative. Reading the sentiment tea leaves is as much an art as it is a science. And when in doubt, defer to the market.
Blake LeBaron, an economist, modeled how this diverse opinion/wise crowd & consensus/dumb crowd works in markets to create trends and crashes. Here's his paper https://t.co/kE0sQmMnTh?amp=1
He built a computer model and imbued "agents" with decision-making rules such as: make money, try not to lose money, don't underperform the average for long periods etc...
What he found was that "During the run-up to a crash, population diversity falls. Agents begin to use very similar trading strategies as their common good performance begins to reinforce. This makes the population brittle. Traders have a hard time finding anyone to sell to in a falling market since everyone else is following very similar strategies." This confirms Page's "diversity" theorem and explains the mechanics of why markets trend and revert, or move in sine waves.
Trends that "make no sense" = robust. Trends that become consensus = fragile. Soros thought of this phenomenon as high and low "distortion regimes". High distortion regimes = when price & sentiment form a reflexive loop, which then creates a budding consensus.
Low distortion = diverse opinion. This price/sentiment loop, or what I call the "Narrative Pendulum" becomes obvious once you learn to look for it. Example, watch this video I clipped together last year that shows the dramatic shift in the dominant narrative that occurred in just two-weeks time https://www.youtube.com/watch?v=K8eKDPL ... =emb_title
Price drives sentiment which drives price, ad Infinium. And THERE IS NO "SMART-MONEY" other than the mrkt itself. All of us are part of the "DUMB MONEY" crowd. The 2 "Bond Kings" calling the end of the bond bull at the exact bottom in 18' is case in point. THIS GAME IS HARD
So that's what Drelles meant & also what makes Druckenmiller so good. He learned early on to listen and respect the market, to harness the wisdom of the crowds, and to only step in to fade a trend once a consensus was clear & the tape no longer confirmed it.

Edit: removed some links so it doesn’t appear like i am shilling or advertising
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steve321
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

bornloopy wrote: Sat Aug 08, 2020 7:08 am
steve321 wrote: Sat Aug 08, 2020 6:21 am I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
You are not approaching market psychology correctly.
I followed the greatest advice I came across and below I pasted a post I made on a different website forum.
I have made >200% returns over less than the past one year as such. I can show “proof”. Market timing worked great for me.

The following is taken from the most important twitter thread an investor could ever come across (links at bottom):
Druckenmiller's first mentor, Speros Drelles, would often tell him that "60 million Frenchman can't be wrong." Here's a thread on what that means and how to know when you should listen to or ignore the "Frenchman" (market):
Drelles was teaching the young Druck about the wisdom of the market, which is based on the idea that the crowd is collectively smarter than any one individual. This collective intelligence was first stumbled upon by the late great statistician, Francis Galton, who in 1906 observed a competition at a local fair where approx. 800 people tried to guess the weight of an ox. To his surprise, the avg of all the guesses was 1,197lbs. The real weight... 1,198lbs.
Countless studies have been done since. All show similar results. Crowd is better than any individual. Scott Page, in his book "The Difference", lays out the "diversity prediction theorem" to explain how this works and what variables are needed to make a crowd wise.
The theorem states that: Collective error = avg individual error - prediction diversity
The implications of this are 3-fold:
1. A diverse crowd will always predict more accurately than the avg individual
2. A crowd is often smarter than even the best of its individuals
3. Collective predictive ability is equal parts accuracy & diversity
Takeaway: Crowds are smarter than any single person, as long as there's a diversity of opinion. This theorem is based on math and is always true.
To take this back to markets. Here's Soros explaining why it's KEY to know when to be a part of the "herd" (ie, follow the trend) and when to disengage & be a contrarian:
Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd; I am liable to be trampled on. Most of the time I am a trend follower, but all the time I am aware that I am a member of a herd and I am on the lookout for inflection points. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.
You want to be a trend follower when there's a lot of people saying "this move makes NO SENSE" and a contrarian when people are saying "this makes so much sense". This is why a bull climbs a wall of worry & a bear falls down the stairs of hope. Trends are driven by (dis)belief
But... and this is important. You ONLY want to be a contrarian once the tape STOPS confirming the consensus narrative. Reading the sentiment tea leaves is as much an art as it is a science. And when in doubt, defer to the market.
Blake LeBaron, an economist, modeled how this diverse opinion/wise crowd & consensus/dumb crowd works in markets to create trends and crashes. Here's his paper https://t.co/kE0sQmMnTh?amp=1
He built a computer model and imbued "agents" with decision-making rules such as: make money, try not to lose money, don't underperform the average for long periods etc...
What he found was that "During the run-up to a crash, population diversity falls. Agents begin to use very similar trading strategies as their common good performance begins to reinforce. This makes the population brittle. Traders have a hard time finding anyone to sell to in a falling market since everyone else is following very similar strategies." This confirms Page's "diversity" theorem and explains the mechanics of why markets trend and revert, or move in sine waves.
Trends that "make no sense" = robust. Trends that become consensus = fragile. Soros thought of this phenomenon as high and low "distortion regimes". High distortion regimes = when price & sentiment form a reflexive loop, which then creates a budding consensus.
Low distortion = diverse opinion. This price/sentiment loop, or what I call the "Narrative Pendulum" becomes obvious once you learn to look for it. Example, watch this video I clipped together last year that shows the dramatic shift in the dominant narrative that occurred in just two-weeks time https://www.youtube.com/watch?v=K8eKDPL ... =emb_title
Price drives sentiment which drives price, ad Infinium. And THERE IS NO "SMART-MONEY" other than the mrkt itself. All of us are part of the "DUMB MONEY" crowd. The 2 "Bond Kings" calling the end of the bond bull at the exact bottom in 18' is case in point. THIS GAME IS HARD
So that's what Drelles meant & also what makes Druckenmiller so good. He learned early on to listen and respect the market, to harness the wisdom of the crowds, and to only step in to fade a trend once a consensus was clear & the tape no longer confirmed it.

Edit: removed some links so it doesn’t appear like i am shilling or advertising
Thanks but I haven't got a clue about how any of this is actianable.
You say you made 200% returns over one year: how long have you been investing for? and what are your long term returns? Returns on all your capital I mean, not on some small investment. What I mean is e.g. that anyone who invested in bitcoin a few years ago made huge gains but it would have been madness IMO to put all their money in bitcoin.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
Nowizard
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Nowizard »

With all the issues about potential inflation, the virus, bond/interest rates low, the huge downturn followed by rapid recovery, there is possibly as much individual assessment ("Guessing") about near-term directions of the market as there has ever been. There are different scenarios based on differing circumstances of individuals and differing perceptions regard how to proceed. Advertisements from some financial planners and firms seem to be worried that people who experienced significant, paper losses during the downturn but who have recovered to first of the year status will pull their money from the market based on predicting another downturn and accepting inflation risk over stock market risk. That is another form of market timing being considered by some (Many?), particularly those who experienced significant gains in 2019. This is not a recommendation, just a comment about how confusing the market is currently and the importance of individual decision making about change vs. noise.

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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Always passive »

steve321 wrote: Sat Aug 08, 2020 6:21 am I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
I use my own version of Dual Momentum with some of my money. It is identical than the advertised DM, but with different equity investments. I do agree with you that in 2020 the system has failed so far. The problem is that no trend following strategy will work under the current market conditions, when the market swings so dramatically within such short period of time. It worked very well in 2000 and 2008.
To stick with it you must be very discipline and believe that in the long term you will come ahead. If after the first failure, you give up, the strategy is not for you.
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jason2459
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by jason2459 »

I totally went all in on a full momentum approach. No matter what sectors or stocks are doing good they will help the value of my portfolio. The beauty of it is I can do this with minimal number of funds.

Here's one thread that describes one strategy to do this
viewtopic.php?f=10&t=88005

Here's another way with fewer funds
viewtopic.php?f=10&t=188176

And the most simplistic way
viewtopic.php?f=10&t=287967
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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steve321
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

jason2459 wrote: Sat Aug 08, 2020 8:47 am I totally went all in on a full momentum approach. No matter what sectors or stocks are doing good they will help the value of my portfolio. The beauty of it is I can do this with minimal number of funds.

Here's one thread that describes one strategy to do this
viewtopic.php?f=10&t=88005

Here's another way with fewer funds
viewtopic.php?f=10&t=188176

And the most simplistic way
viewtopic.php?f=10&t=287967
:D haha, that's a good one, I see what you mean though not everyone would everyone agree that index funds are somewhat similar to a momentum strategy,
https://www.factorinvestor.com/blog/fal ... -investing
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by whodidntante »

jason2459 wrote: Sat Aug 08, 2020 8:47 am I totally went all in on a full momentum approach. No matter what sectors or stocks are doing good they will help the value of my portfolio. The beauty of it is I can do this with minimal number of funds.

Here's one thread that describes one strategy to do this
viewtopic.php?f=10&t=88005

Here's another way with fewer funds
viewtopic.php?f=10&t=188176

And the most simplistic way
viewtopic.php?f=10&t=287967
Lol
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steve321
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

Always passive wrote: Sat Aug 08, 2020 8:40 am
steve321 wrote: Sat Aug 08, 2020 6:21 am I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
I use my own version of Dual Momentum with some of my money. It is identical than the advertised DM, but with different equity investments. I do agree with you that in 2020 the system has failed so far. The problem is that no trend following strategy will work under the current market conditions, when the market swings so dramatically within such short period of time. It worked very well in 2000 and 2008.
To stick with it you must be very discipline and believe that in the long term you will come ahead. If after the first failure, you give up, the strategy is not for you.
May I ask (in case you want to share) why you chose different investments from DM (Antonacci seems to have made many tests) and, in case you want to, which those investments are?
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
Always passive
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Always passive »

steve321 wrote: Sat Aug 08, 2020 9:00 am
Always passive wrote: Sat Aug 08, 2020 8:40 am
steve321 wrote: Sat Aug 08, 2020 6:21 am I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
I use my own version of Dual Momentum with some of my money. It is identical than the advertised DM, but with different equity investments. I do agree with you that in 2020 the system has failed so far. The problem is that no trend following strategy will work under the current market conditions, when the market swings so dramatically within such short period of time. It worked very well in 2000 and 2008.
To stick with it you must be very discipline and believe that in the long term you will come ahead. If after the first failure, you give up, the strategy is not for you.
May I ask (in case you want to share) why you chose different investments from DM (Antonacci seems to have made many tests) and, in case you want to, which those investments are?
I use low volatility equity funds. Why? Because historically they have performed better with lower volatility than the market. As with the DM strategy, low volatility has not done well during this crisis. I think that the problem is that 2020 is not an economic crisis, rather related to health; thus, the tools that may have been effective in the past are not working now.
As I have said, I use this strategy with part of my money, and consider my approach as one way to diversify. DM has not worked, but my B&H portfolio, specially the bond funds have done very well. So, I will continue to use DM. In addition, the crisis is not over, therefore, we need to be patient, DM may still surprise us.
bornloopy
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by bornloopy »

steve321 wrote: Sat Aug 08, 2020 8:06 am
bornloopy wrote: Sat Aug 08, 2020 7:08 am
steve321 wrote: Sat Aug 08, 2020 6:21 am I had understood trend following methods which look at moving averages or momentum (as in dual momentum) as a way to first of all mitigate risk. The higher returns one might eventually get were due to lower losses.
However this year these methods have been quite catastrophic because the market recovered quickly and those doing trend following were out when it happened.
This showed me that these methods gave a false sense of security (at least to me), since you end up losing more with them sometimes, if you are whipsawed.
I am interested to know: are there any investors out there who used to trust these methods (as I sort of did) and have now abandoned them?
You are not approaching market psychology correctly.
I followed the greatest advice I came across and below I pasted a post I made on a different website forum.
I have made >200% returns over less than the past one year as such. I can show “proof”. Market timing worked great for me.

The following is taken from the most important twitter thread an investor could ever come across (links at bottom):
Druckenmiller's first mentor, Speros Drelles, would often tell him that "60 million Frenchman can't be wrong." Here's a thread on what that means and how to know when you should listen to or ignore the "Frenchman" (market):
Drelles was teaching the young Druck about the wisdom of the market, which is based on the idea that the crowd is collectively smarter than any one individual. This collective intelligence was first stumbled upon by the late great statistician, Francis Galton, who in 1906 observed a competition at a local fair where approx. 800 people tried to guess the weight of an ox. To his surprise, the avg of all the guesses was 1,197lbs. The real weight... 1,198lbs.
Countless studies have been done since. All show similar results. Crowd is better than any individual. Scott Page, in his book "The Difference", lays out the "diversity prediction theorem" to explain how this works and what variables are needed to make a crowd wise.
The theorem states that: Collective error = avg individual error - prediction diversity
The implications of this are 3-fold:
1. A diverse crowd will always predict more accurately than the avg individual
2. A crowd is often smarter than even the best of its individuals
3. Collective predictive ability is equal parts accuracy & diversity
Takeaway: Crowds are smarter than any single person, as long as there's a diversity of opinion. This theorem is based on math and is always true.
To take this back to markets. Here's Soros explaining why it's KEY to know when to be a part of the "herd" (ie, follow the trend) and when to disengage & be a contrarian:
Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd; I am liable to be trampled on. Most of the time I am a trend follower, but all the time I am aware that I am a member of a herd and I am on the lookout for inflection points. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.
You want to be a trend follower when there's a lot of people saying "this move makes NO SENSE" and a contrarian when people are saying "this makes so much sense". This is why a bull climbs a wall of worry & a bear falls down the stairs of hope. Trends are driven by (dis)belief
But... and this is important. You ONLY want to be a contrarian once the tape STOPS confirming the consensus narrative. Reading the sentiment tea leaves is as much an art as it is a science. And when in doubt, defer to the market.
Blake LeBaron, an economist, modeled how this diverse opinion/wise crowd & consensus/dumb crowd works in markets to create trends and crashes. Here's his paper https://t.co/kE0sQmMnTh?amp=1
He built a computer model and imbued "agents" with decision-making rules such as: make money, try not to lose money, don't underperform the average for long periods etc...
What he found was that "During the run-up to a crash, population diversity falls. Agents begin to use very similar trading strategies as their common good performance begins to reinforce. This makes the population brittle. Traders have a hard time finding anyone to sell to in a falling market since everyone else is following very similar strategies." This confirms Page's "diversity" theorem and explains the mechanics of why markets trend and revert, or move in sine waves.
Trends that "make no sense" = robust. Trends that become consensus = fragile. Soros thought of this phenomenon as high and low "distortion regimes". High distortion regimes = when price & sentiment form a reflexive loop, which then creates a budding consensus.
Low distortion = diverse opinion. This price/sentiment loop, or what I call the "Narrative Pendulum" becomes obvious once you learn to look for it. Example, watch this video I clipped together last year that shows the dramatic shift in the dominant narrative that occurred in just two-weeks time https://www.youtube.com/watch?v=K8eKDPL ... =emb_title
Price drives sentiment which drives price, ad Infinium. And THERE IS NO "SMART-MONEY" other than the mrkt itself. All of us are part of the "DUMB MONEY" crowd. The 2 "Bond Kings" calling the end of the bond bull at the exact bottom in 18' is case in point. THIS GAME IS HARD
So that's what Drelles meant & also what makes Druckenmiller so good. He learned early on to listen and respect the market, to harness the wisdom of the crowds, and to only step in to fade a trend once a consensus was clear & the tape no longer confirmed it.

Edit: removed some links so it doesn’t appear like i am shilling or advertising
Thanks but I haven't got a clue about how any of this is actianable.
You say you made 200% returns over one year: how long have you been investing for? and what are your long term returns? Returns on all your capital I mean, not on some small investment. What I mean is e.g. that anyone who invested in bitcoin a few years ago made huge gains but it would have been madness IMO to put all their money in bitcoin.
Since oct 2019 i began active investing. Prior to that, buy and hold sp500 only. Please keep in mind I am only 30 and began my HSA, IRA, 401k only in second half of 2017. My 457b began in 2018.

As you view my returns please note that at no given time did I experience a drawdown in any account, below my contribution amounts and thus never had drawdowns anywhere close to what a 60/40 or 100% sp500 fund did in the March crash.

https://i.imgur.com/ujVuNCR.jpg 401k

https://i.imgur.com/FCQgMB2.jpg individual fidelity account, taxable. I started with 70k of my own fund in october 2019. And got 200% returns by April 2020. See that it was transferred out to tdameritrade in april.

https://i.imgur.com/UHaJ5BV.jpg tdameritrade, (portfolio margin account) after transferring it all from fidelity to get access to futures in april. See I have more than doubled THAT since april. So my taxable funds overall have returned 600% since october 2019

https://i.imgur.com/2v41nD3.jpg All existing tax deferred accounts graph - see where taxable account was moved out to tdameritrade in april. 250k amount.

https://i.imgur.com/q7Caxm2.jpg 457b acct. please note this acct is mutual fund only, so not like I can trade any stock. I was very good at timing the market moving the funds in and out of money market/stocks. As my return at 30% outclasses the sp500 YTD.

https://i.imgur.com/cMzSrRi.jpg All existing tax deferred account returns overall, in fidelity

https://i.imgur.com/NtClQQs.jpg HSA

https://i.imgur.com/MituQs3.jpg IRA
mbasherp
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by mbasherp »

I would be very interested to hear some of the moves you made which resulted in such great returns.

Also, what you are doing now.
bornloopy
Posts: 31
Joined: Thu Dec 20, 2018 11:33 pm

Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by bornloopy »

mbasherp wrote: Sat Aug 08, 2020 1:43 pm I would be very interested to hear some of the moves you made which resulted in such great returns.

Also, what you are doing now.
There have been many different ways I've tried to beat the index and most strategies have worked out quite well

At first, before the corona crash, I was outperforming the bull market with small-mid cap biotech stock picking (I'm a physician so this background helped me immensely).

THen during the crash, I profited nicely with SPY puts on my taxable account. I next called the bottom confidently in early April while everyone else remained in disbelief (see my other post above. Follow the trend driven by disbelief, as long as that diversity of opinion exists. When a consensus arises, be cautious, and when the trend reverses while there is a consensus, it's time to stop following the previous trend). Keep in mind, this wisdom was also very helpful in letting me predict that the market would NOT crash when case counts rose again this summer; because the trend stayed intact and disbelief remained at all time highs!

On the early stock rebound, I did well with leveraged ETF (UPRO, TQQQ, TNA) in my tax deferred accounts. I dabbled in futures and options (primarily short puts) on taxable account, they were modestly profitable. The two biggest breakthroughs were good stock picks and recognizing market rotations. I searched the market for hypergrowth stocks (YoY revenue 60+%, especially 100+% ones). The market is very inefficient and you can capture a lot of these at great entries. You will feel lonely doing it at first, especially when the broad market catapults upward while your selection stays flat on the day. But eventually other instiutions/investors will catch on with you.

Some examples: getting in early on LVGO, SE. Finding WKHS, LRN before their big parabolic moves. Right now my biggest positions remain in ETSY. I am carefully monitoring VRM. There are lots of SaaS names that benefited from COVID that I had great swing trades from too, but are quite overvalued even with the dip this past week.

As for market rotations; identifying rotations into tech, or into the epicenter names juiced a lot of my tax deferred account returns. I picked out the right leveraged ETFs like DPST, NAIL, TPOR, DUSL for these, and would swing trade them for a day or up to a few days at a time
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by willthrill81 »

I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by perfectuncertainty »

I was following Dual Momentum until March 2019 as laid out by Antonacci.

Then December 2018 happened and it was awful. I went into the month long SPY. Got a smackdown. Moved into Bonds per the January 1, 2019 signal and missed the recovery. I was done.

I'm really glad I abandoned DM because in 2020 it has been a disaster with an extended drawdown of 20% and is still down by almost 10% for the year.

https://indexswingtrader.blogspot.com/2 ... h-gem.html
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Forester »

steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
ROMO has only existed since late last year. It should be OK in the long run. The other funds probably have funky rules. Everything was equally bad & correlated in the March sell off.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Forester »

glenmalan wrote: Sun Aug 09, 2020 7:34 am I was following Dual Momentum until March 2019 as laid out by Antonacci.

Then December 2018 happened and it was awful. I went into the month long SPY. Got a smackdown. Moved into Bonds per the January 1, 2019 signal and missed the recovery. I was done.

I'm really glad I abandoned DM because in 2020 it has been a disaster with an extended drawdown of 20% and is still down by almost 10% for the year.

https://indexswingtrader.blogspot.com/2 ... h-gem.html
Monthly signals are too beholden to timing luck. ROMO is rebalanced once a week. It's probably better for US investors to use ROMO and pay the fee than rely on DIY models.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by rkhusky »

Using rebalancing bands is a momentum strategy, with the size of the band controlling how long you let the momentum run before taking profits or buying low.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

Forester wrote: Sun Aug 09, 2020 8:01 am
steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
ROMO has only existed since late last year. It should be OK in the long run. The other funds probably have funky rules. Everything was equally bad & correlated in the March sell off.
Interesting what you say about ROMO. Still it did not work during the V shaped recovery.
Considering the other funds, I think VMOT uses 50% momentum and 50% moving averages (but is concentrated in relatively few stocks) and PTLC moving averages.
Btw Antonacci thinks DM is better than ROMO (though of course he would) and here's a critique of Hoffstein.
https://dualmomentum.net/2019/01/17/whi ... entum-gem/
Last edited by steve321 on Sun Aug 09, 2020 9:16 am, edited 1 time in total.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

rkhusky wrote: Sun Aug 09, 2020 8:08 am Using rebalancing bands is a momentum strategy, with the size of the band controlling how long you let the momentum run before taking profits or buying low.
excellent point! Indeed I asked a question on rebalancing a few days ago chiefly because I had this thought (in particular in relation to my gold investment)
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by willthrill81 »

steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
You seem to be insinuating that I just came up with that strategy. In fact, I published it on this forum back in January of 2019. But I no longer discuss it openly on the forum for reasons apparent.

If I have beaten all the professionals, then good for me. I'm quite happy with my results using my strategy for about two years now. :D

However, it's incorrect to say that DM requires a 12 month lookback; that's just what the originator, Antonacci, put forth. I don't use the same lookback period that the originator of part of my strategy used.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

willthrill81 wrote: Sun Aug 09, 2020 9:59 am
steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
You seem to be insinuating that I just came up with that strategy. In fact, I published it on this forum back in January of 2019. But I no longer discuss it openly on the forum for reasons apparent.

If I have beaten all the professionals, then good for me. I'm quite happy with my results using my strategy for about two years now. :D

However, it's incorrect to say that DM requires a 12 month lookback; that's just what the originator, Antonacci, put forth. I don't use the same lookback period that the originator of part of my strategy used.
cool! :happy :sharebeer And yes I understand DM (trademark) as the method put forward by Antonacci
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by RunningRad »

glenmalan wrote: Sun Aug 09, 2020 7:34 am I was following Dual Momentum until March 2019 as laid out by Antonacci.

Then December 2018 happened and it was awful. I went into the month long SPY. Got a smackdown. Moved into Bonds per the January 1, 2019 signal and missed the recovery. I was done.

I'm really glad I abandoned DM because in 2020 it has been a disaster with an extended drawdown of 20% and is still down by almost 10% for the year.

https://indexswingtrader.blogspot.com/2 ... h-gem.html
Similar story for me. I used DM for a slice of my portfolio, and the whipsaw of 2018/2019 shook me out of it. Perhaps "it's different" these days, but market trends seem to reverse very quickly, and in recent years, DM has put you in the wrong asset class in the wrong time more often than it has protected you from drawdowns. Obviously, future performance might be different and better, but it will not be including me.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by yog »

I do not use trend following currently, but found this resource quite informative, where the author explores trend following, and concludes a method that suspends action on trend following signals during times of business-cycle prosperity, a method he calls Growth Trend Timing, helps prevent excessive whipsaws:
http://www.philosophicaleconomics.com/2016/01/gtt/

I suspect this would have missed this year's event entirely, as this time the recession was telegraphed, not confirmed in data.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

yog wrote: Sun Aug 09, 2020 10:32 am I do not use trend following currently, but found this resource quite informative, where the author explores trend following, and concludes a method that suspends action on trend following signals during times of business-cycle prosperity, a method he calls Growth Trend Timing, helps prevent excessive whipsaws:
http://www.philosophicaleconomics.com/2016/01/gtt/

I suspect this would have missed this year's event entirely, as this time the recession was telegraphed, not confirmed in data.
Looks interesting thank you. I am going to study that. :thumbsup
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Elysium »

steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
I don't think anyone believes what he says anymore. Many people make claims, few can actually prove it simply because either they are fudging numbers deliberately or they use fancy mental accounting to make themselves believe they are ahead. As a matter of fact I am ahead of the market myself this year and I am not even trying, it's simply because of the strength of bonds I have held and the fact that I purchased at the bottom in March. You will not hear me go around making these wild claims of market beating success. There are random factors sometimes that keeps you ahead of the market and sometimes behind markets, even when we invest in market indexes only. Everyone invests slightly differently, so the claim someone is beating market has no real value.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Bill2020 »

Elysium wrote: Sun Aug 09, 2020 10:52 am
steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
I don't think anyone believes what he says anymore. Many people make claims, few can actually prove it simply because either they are fudging numbers deliberately or they use fancy mental accounting to make themselves believe they are ahead. As a matter of fact I am ahead of the market myself this year and I am not even trying, it's simply because of the strength of bonds I have held and the fact that I purchased at the bottom in March. You will not hear me go around making these wild claims of market beating success. There are random factors sometimes that keeps you ahead of the market and sometimes behind markets, even when we invest in market indexes only. Everyone invests slightly differently, so the claim someone is beating market has no real value.
I think there are many different strategies that can be successfully executed by diligent individuals to beat the market, but lag the market when implemented on a larger scale. An individual can get in and out of stocks rather quickly with only bid/ask loss. But a large fund (and if its successful it will get large) will drive the price up/down when buying large quantities.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

Bill2020 wrote: Sun Aug 09, 2020 12:23 pm
Elysium wrote: Sun Aug 09, 2020 10:52 am
steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
I don't think anyone believes what he says anymore. Many people make claims, few can actually prove it simply because either they are fudging numbers deliberately or they use fancy mental accounting to make themselves believe they are ahead. As a matter of fact I am ahead of the market myself this year and I am not even trying, it's simply because of the strength of bonds I have held and the fact that I purchased at the bottom in March. You will not hear me go around making these wild claims of market beating success. There are random factors sometimes that keeps you ahead of the market and sometimes behind markets, even when we invest in market indexes only. Everyone invests slightly differently, so the claim someone is beating market has no real value.
I think there are many different strategies that can be successfully executed by diligent individuals to beat the market, but lag the market when implemented on a larger scale. An individual can get in and out of stocks rather quickly with only bid/ask loss. But a large fund (and if its successful it will get large) will drive the price up/down when buying large quantities.
Not really. At least not for liquid ETFs or large stocks, unless you trade really huge volumes
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Elysium »

Bill2020 wrote: Sun Aug 09, 2020 12:23 pm I think there are many different strategies that can be successfully executed by diligent individuals to beat the market, but lag the market when implemented on a larger scale. An individual can get in and out of stocks rather quickly with only bid/ask loss. But a large fund (and if its successful it will get large) will drive the price up/down when buying large quantities.
It is statistically impossible for any individual to do this over a 40 or 50 year timespan. An individual investing for retirement will have an investing lifetime of 50 or more years. Beating the market by trying different strategies that may work in a year or even over a decade doesn't matter, at some point someone who keeps trying will fall behind. Simply impossible to do this over very long periods. It is irrefutable math. Smart people figure out this and quit trying when ahead.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Bill2020 »

steve321 wrote: Sun Aug 09, 2020 12:33 pm
Not really. At least not for liquid ETFs or large stocks, unless you trade really huge volumes
[/quote]

My point is that I can sell out of Microsoft at bid, but Wellington selling out of $5B in Microsoft is going to either have some short term impact on price or take days to execute? That's 23M shares selling while MSFT is 35M average volume.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Bill2020 »

Elysium wrote: Sun Aug 09, 2020 1:32 pm
Bill2020 wrote: Sun Aug 09, 2020 12:23 pm I think there are many different strategies that can be successfully executed by diligent individuals to beat the market, but lag the market when implemented on a larger scale. An individual can get in and out of stocks rather quickly with only bid/ask loss. But a large fund (and if its successful it will get large) will drive the price up/down when buying large quantities.
It is statistically impossible for any individual to do this over a 40 or 50 year timespan. An individual investing for retirement will have an investing lifetime of 50 or more years. Beating the market by trying different strategies that may work in a year or even over a decade doesn't matter, at some point someone who keeps trying will fall behind. Simply impossible to do this over very long periods. It is irrefutable math. Smart people figure out this and quit trying when ahead.
I'm not talking about trying different strategies, I saying that an individual whether doing financial analysis or technical analysis could beat the market consistently. But that same technique when scaled up to a mutual fund will not have the same level of success due to the friction related to the size of the trades that they have to make. I close to tripled my investment on XPO, but it only has a $7B market cap. Companies of this size cannot have a meaningful impact on the vast majority of funds.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by willthrill81 »

Elysium wrote: Sun Aug 09, 2020 1:32 pm
Bill2020 wrote: Sun Aug 09, 2020 12:23 pm I think there are many different strategies that can be successfully executed by diligent individuals to beat the market, but lag the market when implemented on a larger scale. An individual can get in and out of stocks rather quickly with only bid/ask loss. But a large fund (and if its successful it will get large) will drive the price up/down when buying large quantities.
It is statistically impossible for any individual to do this over a 40 or 50 year timespan. An individual investing for retirement will have an investing lifetime of 50 or more years. Beating the market by trying different strategies that may work in a year or even over a decade doesn't matter, at some point someone who keeps trying will fall behind. Simply impossible to do this over very long periods. It is irrefutable math. Smart people figure out this and quit trying when ahead.
First, there is no such as something being "statistically impossible." The likelihood may become infinitesimally small, but it's never zero.

Second, those who followed the classic and simple 200 day moving average strategy over the last 50 years actually did beat the market, at least if we define the market as being approximately equal to the S&P 500.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Uncorrelated »

Bill2020 wrote: Sun Aug 09, 2020 1:42 pm
My point is that I can sell out of Microsoft at bid, but Wellington selling out of $5B in Microsoft is going to either have some short term impact on price or take days to execute? That's 23M shares selling while MSFT is 35M average volume.
I would be very surprised if you (a retail investor) can implement an active strategy at lower costs than well-managed active index funds, such as DFA or avantis. Large trading institutions don't place a market order. They use sophisticated order strategies in order to minimize market impact and slippage. Since most of the strategies implemented aren't time critical anyway, there is no need to rush your order.

Some high frequency trades are time critical and cannot be implemented at large scales, but then you're trading at the time scale of minutes or lower, most bogleheads are looking at trades of months or longer.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Bill2020 »

Uncorrelated wrote: Sun Aug 09, 2020 2:07 pm
Bill2020 wrote: Sun Aug 09, 2020 1:42 pm
My point is that I can sell out of Microsoft at bid, but Wellington selling out of $5B in Microsoft is going to either have some short term impact on price or take days to execute? That's 23M shares selling while MSFT is 35M average volume.
I would be very surprised if you (a retail investor) can implement an active strategy at lower costs than well-managed active index funds, such as DFA or avantis. Large trading institutions don't place a market order. They use sophisticated order strategies in order to minimize market impact and slippage. Since most of the strategies implemented aren't time critical anyway, there is no need to rush your order.

Some high frequency trades are time critical and cannot be implemented at large scales, but then you're trading at the time scale of minutes or lower, most bogleheads are looking at trades of months or longer.
You're right, I can't. I know the large firms have more sophisticated order process. But the small investor has advantages that the big firms don't due to size. I have no doubt that there are many retail investors (a small percentage, maybe very small, but still many) that can and do beat the well-managed firms.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Bill2020 »

I'm basically a buy and hold investor, mostly in index funds. I do have a handful of individual stocks that I have mostly done very well with. But I'm not comfortable/confident enough to put 100& of my equities into individual stocks. Like others on this board I have a small percent of "play" money (about 5% excluding AMZN). Throughout my accumulation phase I was BAH even during 1987, dotcom, and GFC. I even held during the recent Covid-19 drawdown and am up a small percent from the February highs. I saw the crisis coming in January, but unlike CnC who sold a significant portion of his position, I held firm (actually I reduced my AA by 5% in January).

But just because I am back to where I was in February, doesn't stop me from thinking it could have been way worse. We shutdown a large part of the economy for months. We could have been looking at a great depression type drawdown.

I know its not in the BH philosophy, but this is the Investing theory forum, so why not discuss the possibilities, not to time the market but as a stop loss method. I'm recently retired and I would like to avoid a large drawdown. Many will say adjust my AA down, but I would at least like to explore other options.

I'm new here, joined in February but lurked for several years. I don't want to ruffle any feathers, but I've gone through many of these momentum threads and most of the discussion devolves into BAH versus those that want to explore the topic. Can't we just discuss the theories/strategies in terms of another risk mitigation strategy, not a market timing to beat the market strategy? I know this is bogleheads and you could say to post on a different forum, but I am closer to a buy and hold than I am an active trader (way closer). I would just like to have an intelligent discussion with similar buy and hold proponents that maybe aren't comfortable with 50% drawdown.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Forester »

steve321 wrote: Sun Aug 09, 2020 9:05 am
Forester wrote: Sun Aug 09, 2020 8:01 am
steve321 wrote: Sun Aug 09, 2020 6:41 am
willthrill81 wrote: Sat Aug 08, 2020 5:19 pm I'm well ahead of buy-and-hold YTD for 100% U.S. stock and definitely for a globally weighted 100% stock AA, so I'm definitely not abandoning my approach.

As long as U.S. large-cap growth was included as one of the investable tickers, the very simple 7 month relative strength approach that is the basis for part of my trend following strategy has walloped buy-and-hold YTD.
I guess you can always choose in retrospect a convenient look-back period. Also, the shorter the period, the more trades you have, adding to costs.
People who invest money with DM have a 12 month look-back period; and trend following funds or ETFs like VMOT, ROMO and PTLC which use slightly different signals have done terribly. So if you have come up with a superior method which has ouperformed you have beaten all the professionals. :sharebeer Perhaps you should look into starting your own fund. :wink:
ROMO has only existed since late last year. It should be OK in the long run. The other funds probably have funky rules. Everything was equally bad & correlated in the March sell off.
Interesting what you say about ROMO. Still it did not work during the V shaped recovery.
Considering the other funds, I think VMOT uses 50% momentum and 50% moving averages (but is concentrated in relatively few stocks) and PTLC moving averages.
Btw Antonacci thinks DM is better than ROMO (though of course he would) and here's a critique of Hoffstein.
https://dualmomentum.net/2019/01/17/whi ... entum-gem/
VMOT introduces two potential forms of tracking error, for example even if the market is in a healthy uptrend, the value leg (QVAL or IVAL) could under-perform. The other problem which came to mind was VMOT during a hypothetical Dotcom bust, one would want to have the value strategy invested in the market, not hedging the market if market cap is trending down. Since value tends to out-perform in the early part of market recoveries it would make more sense to have trend as a separate strategy, with value always 100% invested. Of course there's nothing to stop an investor using QVAL alongside ROMO for example. 1/3 each MTUM QVAL ROMO would be a complete US portfolio (with ROMO able to dynamically introduce an ex-US tilt).
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Elysium »

willthrill81 wrote: Sun Aug 09, 2020 2:04 pm First, there is no such as something being "statistically impossible." The likelihood may become infinitesimally small, but it's never zero.
Good enough for most people to conclude it extremely unlikely. Chance of winning the Powerball is not statistically impossible either, yet it is not a good strategy to keep betting $2 every week.
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm Second, those who followed the classic and simple 200 day moving average strategy over the last 50 years actually did beat the market, at least if we define the market as being approximately equal to the S&P 500.
As I have said before, everyone makes claims, almost no one has proof.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by willthrill81 »

Elysium wrote: Sun Aug 09, 2020 4:30 pm
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm First, there is no such as something being "statistically impossible." The likelihood may become infinitesimally small, but it's never zero.
Good enough for most people to conclude it extremely unlikely. Chance of winning the Powerball is not statistically impossible either, yet it is not a good strategy to keep betting $2 every week.
I certainly agree with you there.
Elysium wrote: Sun Aug 09, 2020 4:30 pm
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm Second, those who followed the classic and simple 200 day moving average strategy over the last 50 years actually did beat the market, at least if we define the market as being approximately equal to the S&P 500.
As I have said before, everyone makes claims, almost no one has proof.
Image
https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by marcopolo »

willthrill81 wrote: Sun Aug 09, 2020 5:04 pm
Elysium wrote: Sun Aug 09, 2020 4:30 pm
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm First, there is no such as something being "statistically impossible." The likelihood may become infinitesimally small, but it's never zero.
Good enough for most people to conclude it extremely unlikely. Chance of winning the Powerball is not statistically impossible either, yet it is not a good strategy to keep betting $2 every week.
I certainly agree with you there.
Elysium wrote: Sun Aug 09, 2020 4:30 pm
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm Second, those who followed the classic and simple 200 day moving average strategy over the last 50 years actually did beat the market, at least if we define the market as being approximately equal to the S&P 500.
As I have said before, everyone makes claims, almost no one has proof.
Image
https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
Ahh, Meb Faber. I feel like we have had this conversation before. Remind me again how it worked out when he put his own tactical allocation strategy to work?

It almost seems like you just made Elysium's point for him. People devise all sort of strategies, made much easier with lots of computing power to search for patterns. Rarely do these great ideas actually bear fruit going forward.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by willthrill81 »

marcopolo wrote: Sun Aug 09, 2020 5:52 pm
willthrill81 wrote: Sun Aug 09, 2020 5:04 pm
Elysium wrote: Sun Aug 09, 2020 4:30 pm
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm First, there is no such as something being "statistically impossible." The likelihood may become infinitesimally small, but it's never zero.
Good enough for most people to conclude it extremely unlikely. Chance of winning the Powerball is not statistically impossible either, yet it is not a good strategy to keep betting $2 every week.
I certainly agree with you there.
Elysium wrote: Sun Aug 09, 2020 4:30 pm
willthrill81 wrote: Sun Aug 09, 2020 2:04 pm Second, those who followed the classic and simple 200 day moving average strategy over the last 50 years actually did beat the market, at least if we define the market as being approximately equal to the S&P 500.
As I have said before, everyone makes claims, almost no one has proof.
Image
https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
Ahh, Meb Faber. I feel like we have had this conversation before. Remind me again how it worked out when he put his own tactical allocation strategy to work?

It almost seems like you just made Elysium's point for him. People devise all sort of strategies, made much easier with lots of computing power to search for patterns. Rarely do these great ideas actually bear fruit going forward.
IIRC, Faber's funds did not actually follow the 200 DMA but a different strategy almost altogether.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Elysium »

willthrill81 wrote: Sun Aug 09, 2020 5:04 pm https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
This isn't a peer reviewed academic paper from a credible source. This is like asking insurance salesman to show paper showing why purchasing the product they are selling is a great idea. Again, the idea that an individual can do this over their investing lifetime which could last 50+ years is simply ludicrous. Even if there is a tiny probability such a strategy exist, a human running this will simply run out of steam and ideas after several years. The level of persistence and sustainability required is simply humanly not possible. You may try and win for a decade, but in the grand scheme of things a decade or even two of winning isn't going to make a huge difference to a 50 year investing lifetime, unless you quit when on top and get into passive investing for the rest of the term. Keep trying this more, and at some point all of that will revert to less than averages.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by willthrill81 »

Elysium wrote: Sun Aug 09, 2020 7:12 pm
willthrill81 wrote: Sun Aug 09, 2020 5:04 pm https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
This isn't a peer reviewed academic paper from a credible source.
Would your opinion change then if it was peer-reviewed?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by nisiprius »

Just to be clear, we are talking about a strategy that was only published six years ago?

Image

Publisher: McGraw-Hill Education; 1 edition (October 31, 2014)
ISBN-10: 9780071849449

So, what is the story to date? Since October 31st, 2014--that is to say, out-of-sample--has it, or has it not beaten the market, and did it do it with less risk?

If not, in the opinion of those who have followed it, and based on the backtesting, what is a reasonable number of years to expect to have to follow this strategy, in order to have a high probability of seeing the benefit?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by 000 »

I don't often do active management, but when I do, I use my own strategies.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Elysium »

willthrill81 wrote: Sun Aug 09, 2020 7:25 pm
Elysium wrote: Sun Aug 09, 2020 7:12 pm
willthrill81 wrote: Sun Aug 09, 2020 5:04 pm https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
This isn't a peer reviewed academic paper from a credible source.
Would your opinion change then if it was peer-reviewed?
If it were published by those in the same caliber as Sharp, Fama, Samuelson, Friedman, Markowitz, so on.. then I would be open to change. These brilliant minds in finance and economics would have figured it out if such a thing existed.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by perfectuncertainty »

nisiprius wrote: Sun Aug 09, 2020 8:09 pm Just to be clear, we are talking about a strategy that was only published six years ago?

Image

Publisher: McGraw-Hill Education; 1 edition (October 31, 2014)
ISBN-10: 9780071849449

So, what is the story to date? Since October 31st, 2014--that is to say, out-of-sample--has it, or has it not beaten the market, and did it do it with less risk?

If not, in the opinion of those who have followed it, and based on the backtesting, what is a reasonable number of years to expect to have to follow this strategy, in order to have a high probability of seeing the benefit?
https://www.optimalmomentum.com/global- ... -momentum/

That is his performance tracker.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by Forester »

Dual Momentum 2.25% cagr since Jan 2015

https://www.portfoliovisualizer.com/te ... odWeight=0

60% global equities 40% US agg bonds 6.25% cagr

https://www.portfoliovisualizer.com/ba ... tion2_1=40

Dual Momentum was invested in bonds only 10.3% of total months. Despite being 90% equities, the model was badly whipsawed in each of the large corrections (late '15, late '18, Corona Crash).

IMO trend has a use as a partial bond replacement strategy, to provide time diversification, perform better at the extremes of market returns, but implementation is hazardous. At the very least $ROMO now exists so as time goes on we'll witness how a "dimmer switch" approach works.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

Forester wrote: Mon Aug 10, 2020 2:55 am Dual Momentum 2.25% cagr since Jan 2015

https://www.portfoliovisualizer.com/te ... odWeight=0

60% global equities 40% US agg bonds 6.25% cagr

https://www.portfoliovisualizer.com/ba ... tion2_1=40

Dual Momentum was invested in bonds only 10.3% of total months. Despite being 90% equities, the model was badly whipsawed in each of the large corrections (late '15, late '18, Corona Crash).

IMO trend has a use as a partial bond replacement strategy, to provide time diversification, perform better at the extremes of market returns, but implementation is hazardous. At the very least $ROMO now exists so as time goes on we'll witness how a "dimmer switch" approach works.
your point on VMOT above was very good (that it's not a good idea to add a trend following overlay to value funds - indeed AlphaArchitect had a post on the fact that trend following/absolute momentum applied to value funds works poorly). Interesting, since many supposedly knowledgeable people (like Ben Carlson) invest in it.
Why do you think ROMO is superior to all other funds in this category? How about just DM with your assets split in 4 parts, so that you have 4 days of the month to eventually trade? Antonacci said that it is a possibilty, even though he thinks that trading at the beginning of the month is best.
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Re: Anyone abandoning trend following and/or dual momentum approaches?

Post by steve321 »

Elysium wrote: Sun Aug 09, 2020 9:17 pm
willthrill81 wrote: Sun Aug 09, 2020 7:25 pm
Elysium wrote: Sun Aug 09, 2020 7:12 pm
willthrill81 wrote: Sun Aug 09, 2020 5:04 pm https://papers.ssrn.com/sol3/papers.cfm ... _id=962461

I'm not saying that the 200 DMA strategy or any other strategy will beat the market going forward. But it's irrefutable that they did beat the market over the very long-term.
This isn't a peer reviewed academic paper from a credible source.
Would your opinion change then if it was peer-reviewed?
If it were published by those in the same caliber as Sharp, Fama, Samuelson, Friedman, Markowitz, so on.. then I would be open to change.
That's probably not a good argument unfortunately. Sharpe took years to convince a journal to publish his first paper. Having published myself quite a few academic articles in the past, including in very good journals (Impact factor of 30 or above) I do not think that the quality of the journal is necessarily an indication of the quality of the research; and vice-versa.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
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