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It’s Not All About The Rules

I am asked often if trend following would still work if everybody knew about it. The short answer is no. There is much more to trend following trading than simply following rules. There is the psychological aspect, the reason that Nobel prizes were given out for behavioral finance, that sets apart the winners and losers in this unique strategy. Consider this excerpt from an interview with Richard Dennis the famed teacher of the Turtles:

Q: Didn’t you have any reluctance about giving away trade secrets?

A: Sure, but I don’t think trading strategies are as vulnerable to not working if people know about them as most traders believe. If what you are doing is right, it will work even if people have a general idea about it. I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.

So many people imagine there are secrets and if they can only find them they will be set. The reality? It’s all about the right training (and systems). I just finished 23 presentations in Tokyo, Hong Kong, Singapore and Kuala Lumpur. People want to learn, but even experienced fund managers are often either unaware of trend following or confuse it. Anyone can be a trend follower, and excel, but it takes the right training to get there.

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Posted in Psychology, Trend Following
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