Asset management, Commodity price, Commodity risk, Hedging, Market psychology, Market trends, Oil market, Risk management, Trading, Trend following

Trend following and the impact of unforeseen events

“Yes, but how can your system know if XYZ happens and markets go haywire?” This is one of the two most frequently asked questions about systematic trading strategies I’ve used over the last 20 years. Most traders tend to rely on analyses of supply and demand fundamentals to form a judgment about future price changes.

My contention is that this simply does not work and I can make a strong case to back this up (see here, here or here). I can also offer evidence that my systematic approach does work (see here or here) even if I know nothing about the supply and demand economics of most markets I cover. This usually elicits the objection that my system can’t know if some XYZ event might happen tomorrow  (recently, XYZ tended to refer to Trump tweets), upsetting the markets and rendering my strategies ineffective. Recent experience afforded me an (almost) perfect answer to this question (plus another important issue related to trend following). Continue reading

Commodity risk, Economics, Energy crisis, Market research, Oil market

The oil price shock: has it arrived?

Experts seldom expect surprises. In spite of the ever deepening economic and political uncertainties gripping most oil producing and oil consuming regions, most market experts surveyed last year predicted that oil price would fluctuate between $65 and $70 through 2023.

That forecast assumes that nothing unforeseen would happen over the next five years. Such an assumption, to put it politely,  is unjustified and the list of reasons is long and complex, and it can be neither ignored nor wished away. Over the recent months I’d written a handful of articles on the subject of the ‘coming oil price shock.’ Here are the last three: Continue reading

Asset management, Commodity price, Market trends, Risk management, Trading, Trend following

How we knew yields would collapse?

While most market experts completely failed to predict this year’s collapse in interest rates (see the chart below), we traded the event profitably. In this article I summarize the the hows and the whys of our performance.


How did we know to short US T-Notes starting in Q4 2017, then reverse and go long in November of 2018? Did we know interest rates would first rise, then collapse at the fastest rate in 50 years? Are we so brilliant as forecasters? Did we have insider information? The answer is, none of the above.

We did not know what would happen – but profited from the events anyway. Here’s how: Continue reading