”I’m in the band” – a CTA Sub Strategy Comparision

RPM Investments
By August 28, 2018 11:04

”I’m in the band” – a CTA Sub Strategy Comparision

RPM EDUCATIONAL # 8.

Key point: Although trend following is the dominating strategy in the CTA universe, there are also other sub strategies with different characteristics. Whereas trend following is superior in trending markets and persistent crises; during non-trending periods and short-lived crises, trend following suffers more than so-called “diversifying strategies”. Thus, combining different CTA sub strategies can be advantageous from a portfolio perspective.​

Intro: SocGen CTA vs. SocGen Trend 

“Less is more… How can that be? It’s impossible… More is more.” – Yngwie Malmsteen (One of TIME’s ten greatest electric guitar players of all time)

When one thinks of CTAs, one thinks of diversified technical trend following. CTAs? Trend following! It is the same phenomenon as when you think of a famous rock band. That is, you can only remember the lead singer’s name but you have no idea what the other band members are/were called. The Rolling Stones? Mick Jagger! The Doors? Jim Morrison! Nirvana? Kurt Cobain! You get the idea… Maybe you can also name the lead guitarist or drummer (i.e. Keith Richards, Robby Krieger, Dave Grohl, who is now the lead singer of the Foo Fighters), but the rest of the band evaporates into obscurity (if you are not a dedicated fan). The point is that lead singers are often synonymous with the whole band. Same goes for CTAs. Trend following is all too often synonymous with the entire CTA universe. However, without the complete band there would not be any music. So, let us put the band back together… 

RPM Investments
By August 28, 2018 11:04

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