Trading Parabolic Moves (…after the fact)

There is nothing like a story of extraordinary gains to play havoc with investor psychology. Especially when it is founded on asset price moves of a magnitude that could mean life changing levels of profit – if you had only participated in it. Such parabolic irrational exuberances, that drive prices and valuations to unsustainable extremes, happen…

Short Option Overlay for Trend Positions

One of the most frustrating things about a long- and medium-term trend strategy (including the super long-term trend following idea of buy-and-hold) is that prices seem to spend most of the time going nowhere and often retrace to give back a portion of those nice book profits. „The (buy-and-hold) investor only spends about 22% of…

Dealing with Sudden Market Regime Change

The realized return of different strategies and asset classes changes dramatically over time. Targeting these varying risk premia promises great opportunity – adjusting portfolio leverage at the right time has the potential to enhance profits in good times and curb losses in bad. The holy grail in investing would be to find ways to pinpoint…

Mistake Parade I

Large drawdowns are the most difficult time for an investor and trader. They are painful, but unavoidable when investing with the goal of high risk-adjusted returns. Return is based on taking risks and sometimes these risks are bound to materialize as strings of losses. This will happen regularly in a realm where each outcome is…

Focusing on Position Sizing

Rather than searching for the perfect strategy, the level of exposure to risk is a more important ingredient to successful investing. Every trading edge is going to be naturally constrained by the arbitrage activity of all market participants – extraordinary profit opportunities will be temporary at best. Asset classes, investment strategies (eg. value & momentum…

Isn´t it obvious? Switch from Bitcoin to Uranium.

How to constructively integrate speculative ideas in your portfolio. After making several thousand percent on your money in cryptocurrencies, the one thought on your mind is: „How can I do that again?“ Wild feelings are running amok, but recent signs of a bitcoin top may suggest looking elsewhere for crazily volatile speculation. Bitcoin daily price January…

Trend Following for Individual Investors – A Manageable Futures Strategy

A traditional long-only portfolio consisting of globally diversified asset classes can be greatly enhanced by a truly diversifying strategy, namely trend-following managed futures. We have over 40 years of real return data *,*** available from different CTAs running such strategies – there is even research testing the validity of the concept going back 800 years in…

Bear Market Preparation

It sure feels good when the value of your portfolio is rising on an almost daily basis. But, when virtually all assets are going up, that achievement isn´t exactly magic. A rising tide lifts all boats, as the saying goes, and it will pay off in the long run to keep in mind how we…

Are Cryptocurrencies on a similar path as the Internet in 1999?

Opinions on bitcoin and cryptocurrencies usually are very binary: cryptocurrencies are about to take over the world and the sky is the limit for valuations (sometimes with a caveat about nonsensical ICOs) cryptocurrencies are a fad and what we are seeing is the greatest bubble since internet stocks in the late 1990s Often smarter commentators…