Momentum trading: ’skews me

Momentum trading: ’skews me

time-money

In a very interesting paper, Potters & Bouchaud (2005) point out that the question: “what fraction of your trades are winning?”, often asked of fund managers, is largely irrelevant to fund performance. For trend-following strategies, it is well known that small trading losses are common, but occasional big gains are produced when the strategy levers itself into a trend. The longevity of trend-following funds suggests that this characteristic has served them well over the years, and this leads us