Welcome to the February 2025 edition of What’s Caught Our Eyes This Month! As we transition from the holiday season, we’ve curated a selection of compelling podcasts, articles, and performance reports that delve into the forefront of trend-following strategies and market dynamics. This month’s content offers deep insights into the power of convexity in trading, the critical role of noise in trend formation, and the ongoing efficacy of trend-following in equity markets. Whether you’re a seasoned trader or new to systematic investing, these resources provide valuable perspectives to enhance your understanding and inform your strategies.

Podcasts

• The Systematic Investor #333 | Convexity – The Trend Following Game Changer! ft. Richard Brennan
  Produced by: Top Traders Unplugged
  Summary: In this episode, Richard Brennan discusses the often overlooked concept of convexity in trend following. The conversation explores how understanding convexity can lead to cutting losses early, riding big winners, and staying ahead of market turbulence, providing listeners with strategies to protect and grow their portfolios systematically.
  Listen here

Articles

• Better Brakes, Faster Gains: Unlocking the True Power of Convexity in Outlier Hunting
  Produced by: ATS Trading Solutions
  Summary: This article delves into the concept of convexity in trading, emphasizing how robust risk management (“better brakes”) enables traders to capitalize on significant market moves (“faster gains”). It discusses the importance of embracing uncertainty and volatility to achieve geometric compounding and long-term outperformance.
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• The Convexity Edge: Why Embracing Uncertainty is the Key to Long-Term Success
  Produced by: ATS Trading Solutions
  Summary: This piece explores the role of convexity in trading and investing, highlighting how embracing uncertainty and volatility can lead to long-term success. It contrasts convex and concave portfolios, illustrating why strategies that thrive on market unpredictability are more resilient and profitable over time.
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• Momentum as a Universal Principle
  Produced by: ATS Trading Solutions
  Summary: This article examines momentum as a fundamental principle governing both physical systems and financial markets. It explains how trends persist due to feedback loops, structural imbalances, and human psychology, providing insights into why trend-following strategies are effective across various market conditions.
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• Financial Thermodynamics: Entropy, Market Structure, and the Decay of Trends
  Produced by: ATS Trading Solutions
  Summary: Drawing parallels between thermodynamics and financial markets, this article discusses how concepts like entropy and energy flow apply to market trends. It explores how trends require continuous energy inputs to sustain and how, over time, they decay as energy dissipates, offering a unique perspective on market dynamics.
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• The Paradox of Simplicity: Why the Best Trading Rules Are Counterintuitive
  Produced by: ATS Trading Solutions
  Summary: This article challenges the notion that complex trading systems are superior, arguing that simple, robust rules often lead to better performance. It discusses how overcomplicating strategies can introduce fragility, while straightforward approaches enhance adaptability and resilience in dynamic markets.
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• Extracting Meaning from Market Chaos
  Produced by: ATS Trading Solutions
  Summary: This article delves into how traders can make sense of chaotic market movements by identifying underlying structures and patterns. It explores techniques to extract meaningful signals from noise, helping traders refine their strategies and improve decision-making.
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• The Birth of Trends: The Counterintuitive Role of Noise
  Produced by: ATS Trading Solutions
  Summary: Challenging traditional notions of trend formation, this article argues that noise is a fundamental ingredient in the birth of trends. It explains how randomness plays a role in generating sustainable market moves and why traders should rethink how they perceive noise in financial markets.
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• The Myth of Rational Markets: Why Noise is the Fuel of Price Trends
  Produced by: ATS Trading Solutions
  Summary: This article debunks the efficient market hypothesis by highlighting how noise traders drive trends in financial markets. It explores the role of irrational behavior and mispricing in creating opportunities for trend followers.
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Performance Reports

• Rising Stars and Trend Titans – January 2025
  Produced by: ATS Trading Solutions
  Summary: This report highlights the standout trend-following programs for January 2025, evaluating performance across a range of systematic managers. The analysis focuses on both well-established titans and emerging stars in the space.
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• Battle of the Trend Following Indexes – January 2025
  Produced by: Aussie Turtles
  Summary: This report provides a comparative analysis of trend-following indexes, revealing how various strategies performed in January. It showcases dispersion across different approaches and their impact on overall index movement.
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• Battle of the Trend Following Indexes – December 2024
  Produced by: Aussie Turtles
  Summary: A retrospective view on December 2024’s trend-following index performance, detailing how different methodologies navigated the market’s year-end conditions.
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• December 2024: Closing a Year of Market Contrasts
  Produced by: ATS Trading Solutions
  Summary: Reflecting on December 2024, this article explores the contrasting market conditions that defined the end of the year, highlighting key takeaways for systematic investors and the CTA community.
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• Rising Stars and Trend Titans – December 2024
  Produced by: ATS Trading Solutions
  Summary: A deep dive into the top-performing trend-following programs for December 2024, featuring insights into the managers who capitalized on market movements.
  Read more

Research Papers

Does Trend-Following Still Work on Stocks?
Produced by: SSRN – Carlo Zarattini, Alberto Pagani, Cole Wilcox
Summary: Revisiting a 2005 study on trend-following in equities, this research paper analyzes over 66,000 simulated long-only trend trades on U.S. stocks from 1950 to 2024. The findings confirm a highly skewed profit distribution, with less than 7% of trades driving cumulative profitability. The study also evaluates the impact of transaction costs on strategy viability, highlighting that a turnover control algorithm significantly improves net-of-fee returns, making trend-following in equities more practical across different portfolio sizes.
Read more

And that’s a wrap for February 2025!

As we close out this edition, one thing remains clear: markets are as dynamic and unpredictable as ever, yet within that uncertainty lies immense opportunity. From the deep dive into convexity’s role in outlier hunting to the exploration of market noise as a fundamental driver of trends, this month’s insights reinforce the importance of adaptability, robust risk management, and a systematic approach to trading.

The research and performance reports continue to highlight the persistence of trend-following strategies, even in an ever-evolving landscape. As we navigate 2025, those who embrace uncertainty, think probabilistically, and let price action lead the way will continue to find an edge.

Stay sharp, remain disciplined, and we’ll be back next month with more thought-provoking insights to fuel your trading journey!