How to trade the fat tails of the stock market: Tail Watching
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- Опубліковано 24 вер 2024
- Free, live Tail Watching signals:
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Tail Watching is a long-only, trend following model (i.e. Buy positions in trending assets).
Traditional portfolio strategies follow the idea that asset prices follow a normal distribution. However, the existence of fat tails suggests that asset returns are not normally distributed, but skewed.
The fat tails indicate that there is a probability (often larger than anticipated), that prices will move beyond 3 standard deviations. The Tail Watching model capitalizes on these tails in trending liquid markets to generate outsized returns.
Investment philosophy of Tail Watching:
(1) Don't predict, just ride the trend for as long as you can
(2) Cut your losers short, let your winners run
(3) Diversify by asset class, industry & geography