A recent trend following take from Michael Covel.
Year: 2005
Thoughts from the Old Pro
Suggestions for trading from the old pro and founder of Commodities Corporation Amos Hostetter:
1. Experience must teach. Follow it invariably.
2. Observation gives the best tips of all. Observe market behavior and experience shows how to profit.
3. Buying on a rising market is the comfortable way. The point is not so much to buy as cheap as possible or go short at the top prices, but to buy as & sell at the right time.
4. Remember a market is never too high for you to begin buying or too low to begin selling. Let your tape reading show you when to begin. After the initial transaction don’t make a second unless the first shows a profit.
5. There is a great deal in starting right in every enterprise.
6. When something happens on which you did not count when your plans were made, it behooves you to utilize the opportunity.
7. In a bear a market it is always wise to cover if complete demoralization develops suddenly.
8. Stick to facts only and govern your actions accordingly.
9. What is abnormal is seldom a desirable factor in a traders calculations. If a market doesn’t act right, don’t touch it.
Commodities Corporation was the original trading mentor long before Richard Dennis and the Turtles. Commodities Corporation, as noted in my book, taught or funded many of the great market wizard trading pros.
More wisdom and thoughts from old Pro Traders, can be found here.
Bill Dunn: A Good Listen
This presentation (audio) once given by Bill Dunn is interesting. It goes along with the charts in the book “Trend Following”.
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Bernard Drury: Trend Following Trader
Bernard Drury, a top trader, took a typical not so typical route to trading success. An excerpt from Futures magazine:
“So, how does this Russian language major do it? Not surprisingly, he attributes his success to lots of hard work and a little good fortune. Just out of Dartmouth College, Drury took a job as a trader in the grain markets at the Minneapolis Grain Exchange thinking the international aspect of trading would put his Russian skills to use. Though he never needed to speak the language, he grew more interested in the trading industry. His next job took him to Washington, D.C., where he worked as a writer analyzing the grain markets and how agricultural policies affected them. For more than eight years, he watched the grain markets and learned to anticipate certain responses to news and events, a skill that would come in handy later. “I was eager to get back to trading. So in 1990, I moved back to Chicago to trade for myself,” Drury says. It’s no surprise that he stuck to what he knew and traded grain spreads. “It was serendipitous that I chose to study for the MBA while I was in Chicago because, as part of a class project, I did research on the managed futures industry,” he says, describing how that in-depth look turned his attention to a new aspect of trading. “I am lucky I did that class project because it encouraged me to set up a CTA firm of my own.”
Today, Bernard has left the fundamentals behind and is a successful trend following trader.
Larry Hite: Trend Following Trader
From Trader Daily a good quick and dirty bio on Larry Hite:
“As a visually impaired, scholastically challenged kid growing up in Brooklyn, Larry Hite was never voted most likely to succeed — he didn’t even learn to read until the fifth grade. Only toil and sweat could have propelled the scrawny kid to greatness, and toil and sweat were out of the question. “I didn’t want to work for my money,” Hite, 64, says unapologetically. “I wanted money to work for me.” His game plan worked. The ideas Hite concocted in the 1970s and ’80s spawned empires and industries: Man Group, PLC, might not be the beast it is today — it’s one of the largest hedge-fund managers on the planet — had it not collaborated with Hite two decades ago on a revolutionary joint venture. Likewise, Hite forever changed futures trading in 1972, when he published a paper titled “Game Theory Applications” in The Commodity Journal, helping to usher in a new kind of quantitative speculating that masters such as Jim Simons now practice.”
See Larry in my film.
Ed Seykota on Backtesting
“Back testing can help you experiment with various methods for trend identification and risk management until you find some combinations that suit your temperament. Any back testing you do, and any subsequent trading you do, all occur in the moment of now.”
Ed Seykota
25 Unwritten Rules of Management
Bill Swanson, CEO of Raytheon, wrote an unpublished book about management that seems to dovetail in many ways with great trading. Read the Business 2.0 article that broke open the “rules”: The CEO’s Secret Handbook.
Bill Swanson’s ’25 Unwritten Rules of Management’: