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High Winning Percentage: Not Trend Following

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Michael, I’ve enjoyed your books on trend following and your podcast for several years. The foundational truth and simplicity in trend following inspired me to create my own ETF trend following trading strategy in 2007. I call this [name].

The objective of [name] is to identify markets that are trending up and to sell or to short markets that are trending down and to avoid and significant losses on any single trade. No surprises here for you.

The composite average of my returns over the past six years has been solidly better than the benchmark averages as illustrated below:

The six year cumulative return (2008-2013) by asset class, of my [name] signals is as follows:

Benchmark. [name]
US Stock Indexes. 36.6%. 221.1%
S&P Sectors 36.6%. 474.1%
Commodities. (29.9%). 399.2%
World Stock Indexes. (27.0 %). 87.4%
Currencies. 0.7%. 2.1%
Bonds. 11.7%. 55.0%

[name] winning trade signals were 78% winners in 2013 on 265 trades covering all markets that I follow. Historically this winning trade percentage is around 85%.

I have published a weekly newsletter since [date] that gives my readers buy and sell signals at times for 40 different markets. I’ve now narrowed that coverage to just under 30 markets over five different asset classes: US Stock Indexes, S&P 500 Sectors, Commodities, World Stock Indexes, and Bonds. I use to cover Currency but returns were so small after six years that I’ve abandoned this asset group.

I don’t have a strong readership following as I guess I’m not the best marketer. To be honest this is not my full time job. I’ve been a Aerospace Industry CFO since [date]. As managing risk is one of my core responsibilities, trend following seemed a very logical approach to investing to me. I did get my start in the securities business in 1981 after graduating college. So I’ve been an active trader since. I’ve found nothing more effective to use in my personal trading experience, which is where and why I started. After reading your books you gave me the inspiration to try to find a an approach that would work for me. Upon coming up with my strategies, I started to share it with my friends. As of now, no one is paying for my service, I just like sharing my approach with close friends and a few people who had paid me for a subscription in the past.

I’ve attached my past six years history performance for of my signals compared to my benchmark markets as well as my current newsletter.

As the world’s leading authority on trend following I would respectfully enjoy hearing your comments.

Regards,

[Name]
[Country]

Thanks for the note. I have a full schedule now, but perhaps in months to come can examine in detail.

Your winning percentage however means you are not a trend follower, correct?

Note: Rhetorical from me. High winning percentage is not trend following. His effort may be fine, but what he describes in this email is not trend following.

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Posted in Feedback, Trend Following
4 comments on “High Winning Percentage: Not Trend Following
  1. Aaron says:

    There are ‘trend following’ systems that have high winning percentages. Take Mebane Faber’s Ivy Portfolio for instance. I believe that has roughly 70% winning trades. I know other tactical asset allocation systems using momentum can have 60-80% winning trades. Are these trend following systems? I’d say yes.

  2. Michael says:

    70-80% winners is some other trading strategy and is sure not TF as seen in my books. Call 70-80% something else, but it’s not TF.

  3. Steve says:

    Nice discussion on “clipping tails” to juice up the win rate from one of Robert Shiller’s Yale lesson plans. Seek to 5:00 minutes:

  4. Ajesh says:

    What is a typical TF winning percentage?

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