Last Year Doesn’t Matter

I’m a New York Giants fan. They over-achieved this season and made the playoffs, but were very much a mediocre team. A few bounces here and there and they would’ve missed the playoffs. They finished the season with a -6 score differential. Not very good.

Everyone went crazy when they beat the 13-4 Vikings in the first round of the playoffs. Despite a great Win-Loss record, the Vikings were also a very mediocre team. Their score differential was similarly bad -3. 

When the Giants won, people jumped on bandwagon thinking they could knock off the favored Eagles the next week. They got caught up in short-term performance. Big mistake.

The problem is looking at the most recent game instead of the previous 17 — and over the previous 17, the Eagles were clearly superior.

The Eagles produced a regular season score differential of +133. Much better than -6 wouldn’t you say? But when you care only about the most recent performance and getting romantic about storylines, you’re prone to making stupid bets.

In trading, the same psychology occurs. Someone’s favorite team (i.e. stock or overall strategy) has a great year and they think the coming year(s) will be the same. They fall into the psychological pitfalls that have been well documented in behavioral finance.

In 2021, my fund had a great year being up +40% while many of the largest trend-following funds were up very low single digits. Some even lost money. What does this mean? Nothing. It just means I had a better year. It doesn’t mean I’ll have a better career. In 2022, we had an OK year being up +8% while many large firms had great years being up +20-50%.

Now what? Are the big funds better than me now because they had a better 2022? I don’t think so. Many of them trade a high concentration of fixed income markets and guess what the strongest trends were in 2022? I trade a higher concentration of commodities. Guess what the strongest trends were in 2021?

The point is that we all have our years where we spend at the front and back of the line. Just because we all call ourselves “trend-following” funds doesn’t mean we’re going to perform similarly year after year. It’s likely going to vary widely based on a number of factors (portfolio composition, trade timing, etc). 

It’s better to look at the big picture. All of the data. Not just the last few months or even the last few years. Look at the entire body of work and you’ll see who the best of breed are.

Instagram Linkedin

COPYRIGHT © 2024 MELISSINOS TRADING LLC

The information provided on this website is for informational purposes only. By clicking “Accept and Acknowledge” you represent that you are a “qualified eligible person” as that term is defined in CFTC Regulation 4.7 and are a “qualified client” as that term is defined in SEC Rule 205-3(d)(1) under the Investment Advisers Act. Visitors to this website assume all responsibility and risk for the use of this website. If you detect any omissions, misstatements or errors, please contact us immediately. All information appearing on this website may be revised or withdrawn, in whole or in part, at any time without notice and shall not in any event form or constitute part of an offer or terms and conditions of a contract. By using this website, you agree to be bound by any such revisions. The information provided on this website does not constitute an offer to sell or a solicitation of an offer to purchase any securities or investment products, and may not be copied, shown, transmitted or otherwise given to any other person without Melissinos Trading prior written consent. A complete description of the principal risk factors, fees and expenses applicable to an investment in a fund or account managed by Melissinos Trading is provided in the relevant Melissinos Trading disclosure document (use the sodapdf to save these documents as pdf on your computer). Past performance is not necessarily indicative of future results. Futures trading is speculative and involves substantial risk of loss.

Summary Risk Disclosure Statement

THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS LARGE GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY Melissinos Trading (A COMMODITY TRADING ADVISOR, OR “CTA”).

THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION (CFTC) REQUIRE THAT PROSPECTIVE CLIENTS OF A CTA RECEIVE A DISCLOSURE DOCUMENT WHEN THEY ARE SOLICITED TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT’S COMMODITY INTEREST TRADING AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. THIS DOCUMENT IS READILY ACCESSIBLE AT THIS WEBSITE. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD ACCESS THE DISCLOSURE DOCUMENT DIRECTLY AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. YOU ARE ENCOURAGED TO ACCESS THE DISCLOSURE DOCUMENT BY CLICKING ON THE PROMINENTLY PLACED ‘DISCLOSURE DOCUMENT’ BUTTON ON ANY OF THE FOLLOWING PAGES. YOU WILL NOT INCUR ANY ADDITIONAL CHARGES BY ACCESSING THE DISCLOSURE DOCUMENT IN THIS FASHION. YOU MAY ALSO REQUEST DELIVERY OF A HARD COPY OF THE DISCLOSURE DOCUMENT, WHICH ALSO WILL BE PROVIDED TO YOU AT NO COST. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN ANY OF THE FOLLOWING TRADING PROGRAMS NOR ON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE DOCUMENT OR THIS WEBSITE. OTHER DISCLOSURE STATEMENTS ARE REQUIRED TO BE PROVIDED TO YOU BEFORE A COMMODITY ACCOUNT MAY BE OPENED. PLEASE ACKNOWLEDGE YOUR UNDERSTANDING OF THIS IMPORTANT STATEMENT BY CLICKING THE ‘I ACCEPT’ BUTTON BELOW.

Terms and Conditions

In order to use this site, you must accept the terms and conditions of use (the Terms) of this web site. Click to view the Terms and please review them carefully.

The Terms are accepted by selecting the “I ACCEPT AND ACKNOWLEDGE” button below. Acceptance by any representative of an entity is acceptance by that entity.

By selecting the “I ACCEPT AND ACKNOWLEDGE” button below or by otherwise accessing this site, the investor or representative of an entity investor acknowledges that he or she has read these Terms and the Disclosure Document. The regulations of the CFTC require that prospective clients of a CTA receive a Disclosure Document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. This document is readily accessible at this site. You should proceed directly to the Disclosure Document and study it carefully to determine whether such trading is appropriate for you in light of your financial condition. You are encouraged to access the Disclosure Document by clicking below. You may also request delivery of a hard copy of the Disclosure Document, which will be provided to you at no cost. The CFTC has not passed upon the merits of participating in any Melissinos Trading program nor on the adequacy or accuracy of the Disclosure Document or this web site. We reserve the right to amend these Terms at any time. These Terms were last modified on May 31st, 2018.

If you agree with these Terms, please select the “I ACCEPT AND ACKNOWLEDGE” button below. If you review the Disclosure Document, you will still need to accept or decline the Terms before you can gain access to this page.

I ACCEPT AND ACKNOWLEDGE