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Mailbag: Following the Trend

Trend Following

Trend Following


The Turtles had a rare opportunity to not only to train under Richard Dennis and Bill Eckhardt, but to be given their capital to trade. It was a once in a lifetime opportunity. An excerpt from my book:

This is the story of how a group of ragtag students, many with no Wall Street experience, were trained to be millionaire traders. Think of Donald Trump’s show The Apprentice, played out in the real world with real money and real hiring and firing. However, these apprentices were thrown into the fire and challenged to make money almost immediately, with millions at stake. They weren’t trying to sell ice cream on the streets of New York City. They were trading stocks, bonds, currencies, oil, and dozens of other markets to make millions.

This story blows the roof off the conventional Wall Street success image so carefully crafted in popular culture: prestige, connections, and no place at the table for the little guy to beat the market (and beating the market is no small task). Legendary investor Benjamin Graham always said that analysts and fund managers as a whole could not beat the market because in a significant sense they were the market. On top of that, the academic community has argued for decades about efficient markets, once again implying there is no way to beat market averages.

Yet making big money, beating the market, is doable if you don’t follow the herd, if you think outside the box. People do have a chance to win in the market game, but he or she needs the right rules and attitude to play by. And those right rules and attitude collide head-on with basic human nature.

Now some consider some feedback from a listener:

Hi there. I live in Johannesburg, South Africa. I have a huge passion for learning trading and about successful traders. Unfortunately, I do not trade as I do not have the spare funds and support a family. I am a SAP programmer in a bank in South Africa. I have spent the last few years in the theory of Forex trading using the Learntotradethemarket platform. (Nial Fuller). I did his course about 4 times. I thoroughly enjoy reading books on traders like Market Wizards, Turtle Traders etc. Just can’t get enough. I am currently looking for ways to supplement my income to make ends meet. I have about 10 hours a week available and it would be a dream come true, if I could spend those hours supplementing my income in a field I am so passionate about. I am inquiring as to whether your company entertains the idea of people moonlighting for you.

Kind Regards,
[Name]

Thanks for the nice note!

At this time the only interaction I have with clients is via here. That gives the most people the opportunity to get to trading excellence in the fastest way possible.

More feedback in:

Michael, I enjoyed the conference call today and how you kept explaining that you were following the existing trend and not trying to predict anything. I get it! How do you deal with the cognitive dissonance that your logical brain wants you to sell the SPY today but the trend following system wants you to buy instead? Does going against the grain like that have impacts on other aspects of your life as well? Perhaps a topic for a podcast someday.

Take care.
[Name]

Thanks! The Little Book of Trading is a great peak inside the world of 13 successful trend following traders. An excerpt from the intro that goes at your big picture point:

Bottom line: I go looking for answers where most people can’t or don’t know how to go. Digging for trend following trading lessons is my lifeblood. Plenty of people write books telling you that they know what will happen tomorrow. Do you really want to bet on the words of people who say they know what will happen tomorrow? Doesn’t that just feel like a roll of the dice at the craps tables?

Exactly. It is nonsense.

However, I do not want you to take my word. I am going to take you on a trading journey. This journey will have you meeting and learning from eleven traders, all with a similar point of view and trend trading philosophy. These men have literally pulled in billions of profit from the market for decades. They are true trading winners who have shared with me their lessons to moneymaking success. In turn, I am sharing their wisdom with you.

What are the most common threads among these men and their successes? They were all self-starters not born with silver spoons. They did not start with inheritances (but you could have). They figured out how to win, when everyone said they’d lose. They never quit. As diverse as their stories are, they all make up an inspirational foundation you can use to start making a fortune over the course of your lifetime.

Now some feedback from a listener and Little Book of Trading fan:

Hi Michael, I found your Little Book of Trading by chance one day strolling through the public library after an intense study session and I haven’t been able to put it down. I have read it from cover to cover 8 times now and listened to the audio book any time I am in the car. I have been equally obsessed with listening to your podcast and want to join the team. I am currently studying for my professional engineer license exam and soon as I am finished I will be ready to hit the ground running.

On another note… I have to thank you for being such a great roll model and source of inspiration for me. I absolute love the content you create. You have helped me break out of my shell and begin designing my life around achieving my dream… which is trading and traveling. I hope to follow in your footsteps someday and be as successful as you. If I am ever in Saigon I’d love to take you out for beer.

Sincerely,
[Name]

Thanks!

More feedback in:

Great podcast this week. I think you played a speech by Allan Watts once that explained computers as the dumbest fastest file clerk. That speech to this day is one of my favorites. On elevators, Takashimaya department store in Tokyo still have elevator girls. It’s how a country with long term zero growth can have just 3% unemployment.

Regards,
[Name]

Elevator button pushing jobs…

Feedback in on my Flagship:

Is Trend Following an educational service or will I be receiving recommendations on specific securities to buy. Also, with the Flagship Package for $2,997 and the Standard Package for $1,997, do these include specific recommendations or are the only educational in nature.

Thanks,
[Name]

The package is a combination of both. You get the training, the how it works, the rules to trade by, etc. But also those rules give you the recommendations. You will know what to trade and when to enter and when to exit. Bottom line, Flagship leaves you will a trend following system that you can trade right away and a way to know what to trade at all times.

More feedback in:

Mike, Just a quick note. I’ve been a fan of your work for a while and I was so glad to see you getting more exposure on the Daily Reckoning. I’ve been in the market for twenty-plus years and know that trend following is the correct way to view the markets. Always have a plan and always have an exit strategy (Wow, sounds like good life advice too!). Anyway, I wanted to make two suggestions for a podcast:

First get some of the better Daily Fantasy Sports guys on to talk about game theory. These guys are crazy into baseball stats and are probably doing more analytic work than your typical mutual fund (And don’t get me started on mutual funds…)

Second: You NEED, yes NEED, to read Relentless by Tim Grover (Michael Jordan’s former trainer). Heck, I’d buy it for you. (Several years ago, you sent me a gratis copy of Broke. I’d be repaying the favor.) The dude is so up your alley and he needs the kind of exposure that your podcast has.

Keep up the good work, looking forward to many more good shows/articles.

[Name]

Thanks! Great guest idea!

And last today an excerpt from my book Trend Commandments:

Twitter, chat rooms, message boards, e-mails from guys selling get rich fast–the desire to convince someone else of something–never ends. Twitter, however, is the one social media app that fascinates me. It is very cool conceptually. What a great way to reach people, to get a message out, and quick.

However, how can millions of tipsters and tweets bring actionable and credible advice on making money to you on a daily basis? They can’t. It’s too much information. It’s not the most important information, either (remember price?). One inventive fellow, attempting to base his hedge fund around tweets, tossed this gem out:

“If you can do this it gives you a massive edge on the market as you know the mood.” The principle lies in analyzing the 120 million tweets, which are posted daily by the 180 million-strong Twitter members and looking for mood states. Using an algorithm which works in real time, it divides the information into six mood states— anxious, calm, and sad for example—giving them an overall reflection of how the world is feeling.1

Of course, this type of silly talk is not new. People have been leading and misleading each other since the dawn of time. You jump into that game, you get what you get, win or lose.

The government, not surprisingly due to their infinite caring, always want to help those who lose, even if they lose fairly due to their own choice or ignorance. How did the government recently try to fix the problem of losing? The SEC actually supported a new and improved ban of the spreading of false and misleading information about companies. Former SEC Chairman Christopher Cox said he wanted to ensure that investors could continue to get reliable, accurate information about public companies in the marketplace.

Nonsense. That protection already exists—it is called the market price. You cannot fake that.

I am not entirely certain how misleading can be clearly defined. But, suppose some knucklehead wants to spin misleading information on a chat board. And, then an even bigger knucklehead chooses to believe this information and act on it. That is a marriage made in heaven, not an opportunity for the federal government to step in and create more jobs—or what they call regulation.

Along the same lines, feedback from a listener:

Greetings Michael, Here’s something I thought you’d find interesting. Always the skeptic, I listened to Gordon Pennycook with interest talking about people’s ability to detect statements which may sound profound but are actually a collection of buzzwords that fail to contain adequate meaning or truth.
There’s a lot of this in media.

He has coauthored a research paper in Judgement and Decision making “On the reception and detection of pseudo-profound bullshit.” An interesting guy, maybe worth checking out.

Cheers, [Name]

Thanks!

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