FYI: Trend-following boils down to the idea that rising markets attract buyers and falling markets attract sellers.
The historical record of using a moving average (something like the 200-day moving average) or relative absolute performance (something like comparing 12 month returns of stocks to t-bills) to rotate out of stocks and into bonds or cash has shown similar returns to a buy and hold strategy with slightly lower volatility and a lower drawdown profile during huge market crashes.
What’s not to like?
But those statistics are over the course of 90-100 years of market history.
If you plan on using this type of strategy to avoid a calamity like 2008, you also have to accept the whipsaws that have you jumping in and out of the markets in times where we don’t experience a monster of a drawdown.
Regards,
Ted
http://awealthofcommonsense.com/2019/06/will-trend-following-continue-to-disappoint/
