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Subject:  Buying and selling with the trend Date:  10/22/2007  11:04 AM
Author:  spiritualman1 Number:  6 of 19

Does Trend Following Work on Stocks?
November 2005

Over the years many commodity trading advisors, proprietary traders, and global macro hedge funds have successfully applied various trend following methods to profitably trade in global futures markets. Very little research, however, has been published regarding trend following strategies applied to stocks. Is it reasonable to assume that trend following works on futures but not stocks? We decided to put a long only trend following strategy to the test by running it against a comprehensive database of U.S. stocks that have been adjusted for corporate actions. Delisted companies were included to account for survivorship bias. Realistic transaction cost estimates (slippage & commission) were applied. Liquidity filters were used to limit hypothetical trading to only stocks that would have been liquid enough to trade, at the time of the trade. Coverage included 24,000+ securities spanning 22 years. The empirical results strongly suggest that trend following on stocks does offer a positive mathematical expectancy, an essential building block of an effective investing or trading system.
Author(s): Cole / Wilcox Eric Crittenden
Managing Partner / Director of Research & Trading
Blackstar Funds, LLC Blackstar Funds, LLC

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