Practitioner course in systematic investing
Trend Following Strategies
How systematic trend followers trade: time-series momentum, moving average and breakout signals, volatility-targeted sizing, diversified futures portfolios, and what a century of evidence says about returns and drawdowns.
Trend following strategies are among the oldest in systematic trading and among the most studied. Managed futures funds have run it for decades, and academic work has traced its returns back over a century of data. Its rules are simple; its results depend on how carefully the portfolio is put together.
How does a trend following system decide what to trade?
It measures whether each market has risen or fallen over a lookback period, using a moving average, a breakout or the sign of past returns, and takes a long or short position accordingly. Positions are scaled so that a quiet bond market and a volatile commodity market each contribute a similar amount of risk. The edge comes from holding many such positions across asset classes.
Why does trend following have long losing periods?
Because it needs sustained moves. In markets that move sideways or reverse sharply, signals flip and positions lose small amounts repeatedly. The strategy has tended to do well in prolonged moves, including some crises. You will measure its drawdowns and learn why parameters tuned to avoid them in the past rarely avoid them in the future.
Who is this course for?
Traders and investors interested in systematic macro and managed futures strategies. It counts toward the Certificate in Systematic Investing.
What you will be able to do
- Build moving average, breakout and time-series momentum signals.
- Size positions by volatility and target a portfolio risk level.
- Construct a diversified trend following portfolio across futures markets.
- Explain the long-run evidence for trend following and its drawdowns.
- Test a trend strategy across markets without overfitting parameters.
Syllabus, module by module
What trend following is
Time-series versus cross-sectional momentum, and the managed futures industry.
Signals
Moving average crossovers, breakouts and return-sign momentum; why they are closely related.
Volatility targeting
Estimating volatility, scaling positions and setting a portfolio risk target.
Diversification
Building across equity, bond, currency and commodity futures; correlation in crises.
The evidence
Moskowitz, Ooi and Pedersen; Hurst, Ooi and Pedersen's long-run study; drawdowns and recoveries.
Robust testing
Parameter stability, avoiding over-optimisation, and costs of rolling futures.
Project lab
Supervised work on the assessed trend following project.
How the certificate is earned
An assessed project: you build a diversified trend following system on futures data, test it with costs and roll handling, and submit the code with a report. On a pass you receive the Course certificate in Trend Following Strategies, issued by the Institute with a verification code. Read how certification works.
Before you start
Working Python with pandas, and the material of Algorithmic Trading Foundations. Systematic Futures Trading is helpful but not required.
This course counts toward
Questions applicants ask
What is a trend following strategy?
A rule that buys markets whose prices have been rising and sells those that have been falling, across many markets, sized so that each contributes similar risk. It does not forecast; it follows the move once it has started.
Does trend following still work?
Published long-run studies find positive average returns over many decades, with long flat or losing stretches. The course reviews that evidence and the reasons given for it, and lets you test it yourself on recent data.