What is CTA strategy?
The English name of CTA strategy is Commodity Trading Advisors Strategy, which is translated as "Commodity Trading Advisors Strategy". Simply understand that this refers to the strategy of investing in the futures market.
It is very different from the investment strategy of the stock market. According to CTA strategy, professionals can take advantage of the rising or falling trend of futures market to make profits.
The performance of CTA has nothing to do with the unilateral rise or fall of the market. Because the futures of CTA's main trading targets have two-way trading, T+0 and other trading systems different from stocks, the presentation of CTA has no strong correlation with the equity market.
The investment targets of CTA strategy are mainly to invest in commodity futures (agricultural and sideline products futures, financial futures and energy futures), foreign exchange futures and financial futures (interest rate futures and stock index futures). In addition, there is a CTA fund, which uses CTA strategy to invest in futures options.
Because CTA strategy is mainly linked to the futures market, we must understand the futures market if we want to understand it.
Futures prices reflect the expectation of future spot prices. The spot price is determined by the supply and demand sides, and the market is not completely rational. Therefore, when some events will affect the balance of supply and demand and then change the spot fundamentals, the first person who gets the news may enter the futures market for trading, which will lead to price changes and thus lead to fluctuations.
As more and more people know about this event, the number of participants gradually increases, forming a herd effect, thus forming a trend of futures varieties. Therefore, "following the trend" is a common trading logic in futures. Intuitively, when the trend market is formed and the fluctuation is gradually rising, especially the CTA strategy based on trend tracking is more profitable.
The main target of CTA strategy is the variety of futures market. This underlying asset itself is very different from the traditional stock/bond market, and the correlation between products is also very low, which is conducive to diversifying risks. In addition, investment operations can be carried out in both long and short directions, and its flexible characteristics may benefit from both ups and downs. Therefore, CTA strategy has no small investment advantage. Of course, a single strategy is not completely suitable for all markets and specific goals, so we still can't blindly rely on it.