Newedge trend index on the rise

You don't have to be an expert in trend-following to see it is worth taking a closer look at the Newedge Trend Index. It has exploded on the upside while other hedge fund styles have moved sideways. 

Newedge has looked closely at this issue and suggests that the upswing is related to the higher signal to noise ratios for many markets. Newedge looks at the absolute value of price changes divided by the average true range for specific holding periods as signal to noise measure. These numbers have been going up which is a good sign that there have been large absolute price changes without high volatility. Higher ratios make for an environment that is easier to find trends.

The 2014 returns show that trend-followers have found the market trend signals and have taken profitable positions. The signal to noise will change over time and the current low volatility may not continue, but there usually is persistence in this ratio. The performance trend is real and may not go away if current market conditions continue.