SI300: Finding the Optimal Trend Following Rules ft. Richard Brennan

Jun 15, 2024

Expert in trend following strategies, Richard Brennan, discusses finding optimal trend rules, market regimes, Markov models, and AI's impact on trading competitiveness. Topics include industry performance updates, using ATR for position sizing, optimizing rules in different market regimes, skepticism in fund performance, and exploring future trend episodes.

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ANECDOTE

Hypothetical Investment

Niels asks Richard Brennan how he would invest a hypothetical $56 billion paycheck.
Richard replies that he would invest it all in trend following.

ADVICE

Managing CFD Costs

Monitor cash CFD costs like broker spreads, slippage, and swap costs.
Include these costs in your backtesting to assess their impact on trend-following models.

ADVICE

Position Sizing and Price Changes

Don't worry about changing position sizes due to price changes in long-term backtests.
Maintain consistent risk per trade, adjusting position size based on ATR and price.

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Together with Richard Brennan, we discuss the optimal way of doing trend following and how to find the optimal set of rules to use in different market regimes, how to examine market states through Markov models and how artificial intelligence will impact trend following and make short-term trading incredibly competitive. Lastly, we ask ChatGPT what the optimal way of doing trend following is.

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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE

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Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.

IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.

And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.

Learn more about the Trend Barometer here.

Send your questions to info@toptradersunplugged.com

And please share this episode with a like-minded friend and leave an honest Rating & Review on iTunes or Spotify so more people can discover the podcast.

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Episode TimeStamps:

01:04 - What has been on our radar recently?

04:03 - Industry performance update

07:50 - Q1, Dennis: Given the nature of lengthy hold periods, do you recommend trading cash CFD's accounting for the overnight costs?

11:40 - Q2, Ramki: Using ATR for position sizing when backtesting a trend following system

14:47 - Optimal rules to use in different kinds of market regimes

18:46 - How to use Markov models and mathematical algorithms to optimize trend following strategies

41:17 - Is trend following threatened by AI?

51:39 - "ChatGPT, what is the optimal way of doing trend following?"

Resources discussed in this Episode:

SI300: Optimal Trend Following Rules Paper

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PLUS: Whenever you're ready... here are 3 ways I can help you in your investment Journey:

1. eBooks that cover key topics that you need to know about

In my eBooks, I put together some key discoveries and things I have learnt during the more than 3 decades I have worked in the Trend Following industry, which I hope you will find useful. Click Here

2. Daily Trend Barometer and Market Score

One of the things I’m really proud of, is the fact that I have managed to published the Trend Barometer and Market Score each day for more than a decade...as these tools are really good at describing the environment for trend following managers as well as giving insights into the general positioning of a trend following strategy! Click Here

3. Other Resources that can help you

And if you are hungry for more useful resources from the trend following world...check out some precious resources that I have found over the years to be really valuable. Click Here

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