In the last post we looked at the Turtle Trading system and saw that its performance went from outstanding for a long period of time to flat for 20 years. This opens a can of worms: Does Trend Following work, is it dead, do markets change, does trend following rules need to adapt to these […]
Entries Tagged as 'kurtosis'
March 10th, 2010 · 14 Comments · Strategies
December 8th, 2009 · 8 Comments · Data, Forex, Trend Following
I posited in an earlier post that fat tails are one of the main reasons why trend following works. The underlying concept can be summarized as follows: trend following attempts to capture big price moves (a.k.a. trends). Since price distributions are leptokurtic (i.e. they exhibit fat-tails) long trends occur at abnormal frequency, providing greater sources […]