Our Approach to Trend Following – The Core Philosophy
All of our models — Soft Commodities, Agro, Energizer, Gold Bug, Hot Commodities, Krypto Knight, Crypto Bull, Satoshi, Vitalik — are built on the same core investment philosophy.
They differ only in market focus, concentration, and risk profile.
Trend-following is simple in principle, but powerful in practice. Markets move in long cycles, driven by forces that investors cannot predict: supply and demand shocks, inflation shifts, geopolitical tensions, weather, mining output, currency trends, regulation, technology cycles, investor psychology. These forces generate large and persistent price movements, forming long-lasting trends in both upward and downward directions. Our job as trend followers is to identify these movements early with the help of quantitative models — and to step aside when the market turns against us.
Absolute Return and Low Correlation
All our trend-following strategies target absolute return, meaning they do not depend on the stock market or other traditional investments to perform. They also do not rely on the underlying markets being in a positive trend — the models can profit in different market environments.
Because our programs trade markets driven by completely different forces — agricultural cycles, energy flows, metal shortages, monetary shocks, crypto adoption — they naturally provide low or even negative correlation to equities, bonds, or real estate.
This makes them powerful diversifiers in a world where most investments tend to move in the same direction — a fact that has been demonstrated repeatedly by industry benchmarks such as the SG Trend Index, the Barclay CTA Index, and the Morningstar Managed Futures Index, all of which have shown strong performance during periods when traditional portfolios struggled.
Buy Strength. Avoid Weakness. Let Winners Run.
The core of our approach is a disciplined set of principles:
- We buy markets that are rising.
- We avoid or short markets that are falling.
- We stay out during sideways, choppy periods.
- We allocate more to strong trends, less to weak ones.
This simple philosophy has worked for decades because it mirrors how markets naturally behave.
It may sound easy, but trend following also comes with periods of drawdowns — a natural and unavoidable part of the strategy. When markets lack strong, sustained trends, there is simply nothing for a trend-following model to capture.
The discipline lies in staying with the process long enough to capture the major trends when they emerge.
Long and Short – Always With the Trend
Every program, whether commodity-based or crypto-focused, can take long or short positions.
This means performance is not dependent on rising markets — falling markets can be just as profitable.
When the trend is up, we buy.
When the trend reverses, we sell or short.
When there is no trend, we wait.
Rules, Not Opinions
Our approach is entirely rule-based.
The algorithm identifies breakouts, volatility shifts, and sustained price trends, guiding us through changing market conditions with predefined and objective rules rather than subjective judgement.
Because the rules are fixed and transparent, we can test them rigorously on historical data to verify whether they have been profitable over time. Today we have 40–50 years of high-quality historical data for most major markets, allowing us to evaluate how the rules have performed across different economic regimes.
This rule-based structure keeps the process disciplined, consistent, and adaptive — even during periods of high market volatility.
It creates a stable and repeatable investment framework designed to respond to the market as it is, not as we might wish it to be.
However, historical results in no way guarantee that the same patterns will continue to work in the future.
Risk First, Return Second
In trend following, risk management is everything. We:
- Avoid markets without clear direction
- Reduce exposure when volatility spikes
- Limit risk per position
- Let strong positions grow while weak ones are cut quickly
No trade is held without purpose.
Every program is designed to survive long enough to catch the next major trend.
How Natural Commodity Cycles Work
Commodity markets follow powerful and predictable long-term cycles driven by the basic forces of supply and demand. These cycles are not theoretical — they repeat across history in energy, metals, agriculture, and soft commodities.
When prices rise, producers respond. Farmers plant more acreage, miners expand output, energy companies drill new wells. At the same time, high prices reduce consumption as buyers seek alternatives, increase efficiency, or simply delay purchases.
Eventually, production exceeds demand, inventories build, and prices begin to fall.
When prices fall, the opposite happens. Producers cut back because output becomes unprofitable. Mines close, drilling slows, acreage shrinks. Low prices stimulate demand as consumers buy more, expand usage, or shift back from substitutes.
As supply tightens and demand strengthens, the market moves into deficit — and a new uptrend begins.
These slow-moving adjustments in production and consumption naturally create multi-year trends, because supply and demand cannot rebalance instantly. As a result, commodity markets often produce long, sustained price movements rather than short, random fluctuations.
Trend-following strategies are naturally aligned with this behaviour. They participate in rising markets when supply is tightening and demand is increasing — and step aside or go short when oversupply drives prices lower.
Understanding these supply–demand dynamics is essential for navigating the commodity space, because the forces that create trends are rooted in real physical constraints, human behaviour, and economic incentives — not market opinion.