Recent post about managed futures losses
I thought to share an email I received.It is a common theme of other emails I have been receiving and discussions on the phone…Let me know your thoughts..
I am a committed trend follower and recently read your book. One thing that I find very hard to reconcile in my head is how to keep invested with a CTA that is in a drawdown for such a long period. I guess my problem, if it is a problem, is that I am thinking of the investment in the CTA as a position, and if it loses then I am looking to cut it, as to lose such a large proportion of my capital is anathema to me.
When we trade or when we invest all we are dealing with is complete uncertainty. Anything can happen. The last 3 for managed futures have been the worst over the last 35 years. This draw down can easily continue as well as the possibility that there can be a massive run up as in 2007-2008 can occur. No one knows or has a crystal ball. As much as Past Performance is not indicative of future performance we must accept the risks and these possibilities. What I do and it is not perfect is I try to buy the draw downs of CTAs that have been around more than 10 years. You never catch the bottom…in some cases the losses have continued and in others there have been rebounds.
Consider having an uncle point and then close the position. In all honesty, trading has to be one of the hardest things to do and that is why most do not succeed. It is easy to enter when the CTA is having a good run…and this is the worst thing to do. It is much harder to enter when they are having a draw down…and even so there are no guarantees…Boils down to accepting and being comfortable with the complete and inherent risks….
I hope this sheds some light on my approach…
All the best
Passing Cisco certification exams give network professionals the chance to prove their networking knowledge and expertise.