Trend-Following / CTA
Systematically ride price trends across many markets, long or short, using futures.
How it works
Trend-following, the core of managed-futures CTA funds, trades price direction across dozens of futures markets: stocks, bonds, currencies, and commodities. A model goes long markets in uptrends and short those in downtrends, sizing each position by its volatility so no single market dominates. There is no forecast of value; the rule simply says 'the trend is your friend until it bends.' Because it can profit from falling prices, it often shines during prolonged crises when stocks fall steadily, earning a reputation as 'crisis alpha.' Diversification across many uncorrelated markets smooths returns, but the strategy bleeds slowly during choppy, directionless periods.
The trade-offs
✅ Strengths
- Can profit in bear markets by going short
- Historically diversifies stock/bond portfolios ('crisis alpha')
- Fully systematic and unemotional across hundreds of markets
⚠️ Weaknesses
- Painful, extended drawdowns in sideways 'whipsaw' markets
- Long stretches of underperformance test investor patience
- Leverage via futures amplifies mistakes
Publicly associated with
Naming a practitioner is historical, educational context — never an endorsement.
Legends who play this way
Play the Trend-Following / CTA style in Conviction League
Draft a critter that trades this way, train it on a simulated market, and backtest it on the leaderboard — free and fully simulated, so there's zero real-money risk.