David Harding Speaks to Trend Following

Why did I put the month by month trend following performance tables in my books? Those track records teach. Those track records show the lumpy returns necessary to win big in the long term. Trend follower David Harding (in my books and film) recently opined:

What we haven’t invented is a magic money machine, which would be nice, into which you read the data and you make money every month. We know we haven’t got that we’ve never pretended to have that. On a good day we might have forecast that we had a Sharpe ratio of around about 1, on the basis of that last historic track ratio, have a Sharpe ratio of around about 1 that means you win seven months out of 12 on average, which means you lose five months out of 12 on average, which means you have plenty of losing months, plenty of losing back to back months, plenty of losing quarters and quite a few losing years. The fact that we are losing for the second year in the four or five, doesn’t in itself tell you anything, but if I said it didn’t worry me at all, it’s a bit of a straw in the wind I would say.

Speaking of Harding … my podcast today:

Synopsis: Michael Covel comments on four CNBC interview clips from legendary trend following trader David Harding of Winton Capital. Covel goes through the interviews with Erin Burnett, then of CNBC, Joe Kernen, and Fast Money. Covel comments as the anchors ask question after question that show they don’t yet understand the basic concepts behind Harding’s success. They beg for stock tips, ask predictive political questions, idiotically compare Harding’s approach to Long Term Capital Management, and otherwise not get the big idea. Covel’s analysis shows that reading teleprompters doesn’t necessarily imply one has insight. It’s an educational analysis to see how David Harding thinks and talks about trend following trading and to watch how the media system doesn’t get it. Those lessons alone are worth the price in gold. Special Offer free trend following DVD: www.trendfollowing.com/win.

You might like my 2017 epic release: Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets (Fifth Edition). Revised and extended with twice as much content. Out April 24th 2017.

5 thoughts on “David Harding Speaks to Trend Following

  1. Hi Michael,

    Thanks for putting interviews in one place, great work.

    I think you might be reading too much into some of the hosts questions. Harding says “… it’s dangerous to be highly leveraged in this environment…” So he has some macro view about the world, but doesn’t make trades on this. Harding, as an intelligent person who watches the markets every day, sees what’s going around the world and has some opinion about it.

  2. I disagree about reading into too much, i.e. Kernen. Further, what is Harding’s fundamental opinion useful for? He doesn’t even think it is useful otherwise he would shift his trend following strategy to an opinion strategy.

  3. Hi Mike

    The podcasts are absolutely amazing work and I still love this blog. Please keep up the amazing and thought provoking work!

    I have a quick question in relation to the David Harding comment you have quoted here. I am not for one second questioning Mr Hardings performance or otherwise but it is just the end of the quote where he speaks about his second losing year in four or five. He states “….but if I said it didn’t worry me at all, it’s a bit of a straw in the wind I would say”. I pardon my ignorance but what do you think he means when he says “it’s a bit of a straw in the wind I would say”. Does that mean he places no signifance on the second losing year in four or that he does place a signifance on it?

    I listened to your latest podcast about the Harding interviews. Before I knew of your work I would have been the CNBC camp with the sly remarks and sniggers behind closed hands. From studying your work over the last two years I could foretell what you were going to say in your comments before you said it. It was a bit of a “Aha” moment!

  4. No one wants to lose, but everyone can see what trend following track records look like across many different traders going back decades, right?

  5. Hi Mike My partner and I have been putting together our trading system and are set on building balance to limit drawdowns. Would you or any of your followers know where I can Find a list of non correlated cross currency’s that have been proven over time. We have not been able to come up with a concrete list That proves non correlated wins out correlated over a 15 year back test. Any ideas point me in the right direction. Keep up the good Work! Shawn!

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