Formal Name: Kingdom of Saudi Arabia
Local Name: Al Arabiyah as Sa’udiyah
Local Formal Name: Al Mamlakah al Arabiyah as Sa’udiyah
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Saudi Arabia and Systematic Trading
Saudi Arabia is the world’s largest exporter of crude oil and the dominant member of OPEC+, the coalition of oil-producing nations that coordinates production levels to influence global crude prices. Saudi production decisions are among the single most important drivers of sustained directional trends in energy markets globally. When Saudi Arabia and OPEC+ cut production, crude oil prices tend to trend higher for extended periods as supply deficits develop. When production increases, prices trend lower. These policy-driven production cycles produce exactly the multi-month directional moves that systematic trend following is designed to capture.
The Saudi riyal’s peg to the US dollar at a fixed rate eliminates currency trend opportunities in the USD/SAR pair. However, the riyal peg makes Saudi Arabia’s fiscal position directly sensitive to crude oil prices: when oil prices fall, Saudi government revenue falls and the cost of maintaining the peg increases. Periodic speculation about the sustainability of the riyal peg has produced dynamics in related currency markets, particularly in other Gulf Cooperation Council currencies, that systematic approaches can capture through regional currency and sovereign debt instruments.
The Tadawul (Saudi Exchange) is the largest stock exchange in the Arab world by market capitalization, with the TASI index dominated by Saudi Aramco, financial institutions, and petrochemical companies. The index’s heavy weighting toward energy-related sectors means TASI trends closely follow global crude oil price cycles. For global systematic traders who include emerging market equity futures in their portfolios, the Tadawul’s sector concentration provides another instrument through which Saudi energy policy dynamics express themselves as price trends.
Saudi Arabia’s Vision 2030 economic diversification program is producing a structural shift in the kingdom’s economy away from oil dependence toward technology, tourism, and financial services. This multi-year structural transition is creating the type of long-duration economic transformation that produces sustained trends in Saudi financial assets as capital flows respond to the changing economic mix. Systematic approaches that follow price trends in regional equity and currency markets are positioned to capture these structural shifts as they develop in prices over years.
For Saudi-based traders and investors, systematic trend following on global futures markets provides diversification from the oil price concentration that dominates domestic Saudi wealth. A rules-based approach trading global equity indices, bonds, currencies, and commodities across all major regions produces returns that are structurally uncorrelated with Saudi domestic market conditions and with the oil price cycle that drives them.
Frequently Asked Questions
How does OPEC policy affect global trend following returns?
OPEC production decisions produce sustained, multi-month directional trends in crude oil prices that systematic trend following is designed to capture. When OPEC cuts production, the resulting supply deficit drives prices higher over months as inventories draw down. When OPEC increases production, the supply surplus drives prices lower. These policy cycles produce the same type of sustained directional moves in energy markets that monetary policy cycles produce in interest rate markets, and systematic approaches capture them in the same way.
Why is Saudi Arabia significant for systematic traders despite the riyal peg?
Because Saudi Arabia’s influence over global crude oil prices through OPEC+ is the most direct available lever on energy market trends. The riyal peg eliminates one currency trend opportunity, but Saudi production decisions drive crude oil, refined product, and petrochemical trends that affect multiple instrument classes in global futures markets. Systematic traders positioned in energy futures are capturing Saudi policy decisions as price trends regardless of whether they can directly access Saudi domestic markets.
What trend following opportunities does Vision 2030 create?
The multi-year structural transformation of the Saudi economy from oil dependence toward diversification creates sustained trends in regional equity valuations, foreign capital flows into Saudi markets, and the relative performance of Saudi financial assets versus other emerging market instruments. These structural shifts develop over years rather than months, producing the type of long-duration trends that systematic approaches with appropriate holding periods capture as prices adjust to reflect the changing economic fundamentals.
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