"...a low volatility environment is usually a good environment for trend following strategies; see Jez Liberty’s state of trend following report here..."
http://quantumfinancier.wordpress.com/2010/08/27/regime-switching-system-using-volatility-forecast/
(By the way the volatility is defined as the "std. deviation of the price rate of change" )
I am not a professional quant with education on related subjects.
Therefore I am not capable of testing the idea above thoroughly.
Would you approve that trend following strategies(TFS) perform better under lower vol.?
If yes then what would be a suitable method to exploit this idea?
==> switching to TF strategies when the volatility is below a trigger value (e.g. mov. average)?
==> switching to TF strategies when the volatility is turning down from an extreme reading (e.g. going back under the upper bollinger band)?
==> none?
