Disclosure:
Man Investment Products, Ltd., formerly AHL, have been applying a systematic and disciplined approach to trading the world’s markets for more than ten years. Complex trading systems, built around ideas generated by the research team, are designed and tested in Man Investment Products’ proprietary software environment. This has been developed specifically to investigate market behavior and to support their risk management techniques. Risk control is of paramount importance and Man Investment Products’ systems are monitored continuously in an effort to ensure that predefined limits are not exceeded. New markets are never overlooked and progressive ideas are constantly tested to enable Man Investment Products to remain at the cutting edge of the trading arena.
A Short Passage from The Complete Turtle Trader Related to Trend Following Funds
While Dennis knew exactly where the sweet spot was for making big money, he often fumbled his own trading with too many discretionary judgments. Looking back, he blamed his pit experience, saying:
“People trading in the pit are very bad systems traders generally. They learn different things. They react to the [price] ‘tick’ in your face.”
Dennis and Eckhardt did not invent trend following. From the 1950s into the 1970s, there was one preeminent trend trader with years of positive performance: Richard Donchian. Donchian was the undisputed father of trend following. He spoke and wrote profusely on the subject. He influenced Dennis and Eckhardt, and just about every other technically minded trader with a pulse.
One of Donchian’s students, Barbara Dixon, described trend followers as making no attempt to forecast the extent of a price move. The trend follower:
“disciplines his thoughts into a strict set of conditions for entering and exiting the market and acts on those rules or his system to the exclusion of all other market factors. This removes, hopefully, emotional judgmental influences from individual market decisions.”
Trend traders don’t expect to be right every time. In fact, on individual trades they admit when they are wrong, take their losses, and move on. However, they do expect to make money over the long run. In 1960, Donchian reduced this philosophy to what he called his “weekly trading rule.”
The rule was brutally utilitarian:
“When the price moves above the high of two previous calendar weeks (the optimum number of weeks varies by commodity), cover your short positions and buy. When the price breaks below the low of the two previous calendar weeks, liquidate your long position and sell short.”
What Connects Man AHL to Donchian’s Weekly Rule
The intellectual lineage from Donchian’s 1960 weekly rule to Man AHL’s complex proprietary trading systems is direct. Donchian’s rule contains every element that defines systematic trend following: a price-based entry signal, a defined exit condition, and directionless applicability to any market. Whether the price is a commodity, a currency, a bond, or an equity makes no difference. When price breaks above the two-week high, buy. When it breaks below the two-week low, sell short. The elegance of the rule is its simplicity. The power of the rule is that it works because markets trend, not because the rule is sophisticated.
Man AHL’s complex trading systems are more sophisticated versions of the same core logic. They use longer lookback periods, volatility-adjusted position sizing, multiple correlated signals, and portfolio-level risk management. But the underlying principle is unchanged from 1960: follow the direction of price movement and cut losses when price reverses. Dennis’s comment about pit traders being bad systems traders illuminates why the systematic approach matters. A pit trader reacts to the tick in their face. A systematic trader reacts to a rule that was built when the mind was clear and the emotional pressure of a live position was absent. The pit reaction and the rule reaction will diverge at the most critical moments: when the loss is growing and the emotional instinct is to hold, or when the winner is running and the emotional instinct is to take the profit.
Barbara Dixon’s description of the trend follower disciplining their thoughts into a strict set of conditions to the exclusion of all other market factors is the complete description of what Man AHL’s systems do at institutional scale and what Richard Donchian did with a pencil and a weekly price chart in 1960. The mechanics differ by orders of magnitude. The principle is identical.
Frequently Asked Questions
What is Man Investments AHL and what is its trading approach?
Man Investment Products, formerly AHL, is one of the world’s largest systematic trend following operations. It applies disciplined, rules-based approaches to global markets using proprietary research and software. Risk control is central to the operation, with systems monitored continuously to maintain predefined risk limits. The firm’s approach is systematic and technical, designed to capture sustained price trends across global markets.
Who is Richard Donchian and why is he called the father of trend following?
Richard Donchian was a trader and researcher active from the 1950s through the 1970s who developed and codified the systematic trend following approach. He published extensively on the subject and taught multiple generations of traders who became the industry’s founding figures. His 1960 weekly trading rule, buying when price exceeds the two-week high and selling short when it breaks the two-week low, established the breakout-based entry logic that underlies most systematic trend following approaches including the TurtleTrader system.
Why was Richard Dennis a better trend following teacher than trader?
Because his pit trading experience trained him to react to short-term price movement with discretionary judgment rather than systematic rules. As he acknowledged, pit traders learn to react to the tick in their face, which is the opposite of the measured, rule-based response that systematic trend following requires. He understood the theory and could teach it, but his instincts pulled toward discretion in ways that occasionally undermined his own trading.
What makes Donchian’s weekly rule significant despite its simplicity?
Because it demonstrates that the edge in trend following is in the concept, not the complexity. A rule that buys new highs and sells new lows, applied consistently across any market, captures the structural feature that markets trend. The rule does not predict where price will go. It responds to where price has been and follows it. Every subsequent development in systematic trend following, from the TurtleTrader rules to Man AHL’s complex systems, applies more sophisticated versions of this same reactive logic.
Trend Following Systems
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