Cutting Edge introduction: Followers of fashion

Focusing on how often a trading strategy ends on the winning side can distract from the question of whether it profits on average. The key is in the return distribution’s skew – and at least for trend-following strategies this can be directly controlled. Laurie Carver introduces this month’s technical articles

Asset price bubbles are often driven by investors on winning streaks that then spectacularly fail in the following bust, known in financial folklore as picking up pennies in front of a steamroller. The track record of such traders looks great – until their gains are wiped out. But the flipside of this – tail risk strategies – can get a bad rap, as the big win that makes up for a long history of