10 thoughts on “Trend Following Performance Data Video

  1. Agree totally-trend following is a total change in mindset from looking at exits more than just entries,adjusting for volatility,psychology,position sizing,etc-a total risk management system.

    Pity the investment banks and fundamental investors/traders unaware of above topics!

  2. Hi Micheal,

    I agree with the rules of trend following and the philosophy behind it. Granted, investing in mutual funds is not the best way to go about getting rich. I know more than most since I have worked for AIM Funds and AGF Management here in Toronto Canada. All I saw was a company that was suckering both worker and investor into ponying up funds that would under perform the market in the long run. In fact, you could have made more money here in Canada buying the shares of mutual fund companies than in investing in their products!

    However, as I have stated in previously, I do agree with trend following methodologies and philosophies but there are still some concerns that I have. The first one comes from Dr. Van Tharp who stated that twenty day breakouts no longer work for the original turtle method and as a result, it had to be upgraded to forty days. Why? As you stated in your books and on this site, this strategy is supposed to be universal through time and not change. If that is so, why has it changed? Why does system one fail now?

    In addition, to the above, I would also like to address another issue of concern. When I was conducting some research into the life of Richard Dennis, I came across some information that was somewhat disturbing. In Wikipedia, there was an brief article on him and on that page there was this brief section.

    Much of his early success involved trend
    following during the “Great Russian Grain
    Robbery” when the U.S government secretly
    agreed to sell grain to the Soviet Union,
    thus driving up prices over an extended period.

    http://en.wikipedia.org/wiki/Richard_Dennis

    Do not get me wrong, I am not trying to tear apart his performance over the years. I still think that the man was a genius but I wonder if some or most of his success was due more to government market manipulation rather than sound trend following strategies.

    As I have said Micheal, I am not your enemy or critic and would not want to be. If it were not for you, I would never have begun trading. I am just curious and would like to remove any ambiguity from my mind.

  3. I had to read your thought again about government manipulation. You do realize that the government manipulates the market all the time and always has? Trend followers have to deal with that like everyone else. But regardless of whether a government is doing something or not, all you can do is follow the trend. If a trader follows a trend, which is using sounds logic, then afterward finds out a government manipulated a market, how is that trader at fault or how can you cast a negative light on that trader? I don’t know what happened or not happened in the example you mention, but you have a twisted foundational view about how this all works. Sorry for being blunt, but you are just out on a limb.

  4. After writing 2 books on the subject, I had hoped that by now people would not actually think trend following simply equals buying a 20 day breakout. Right around the time I hear this, someone trots out, “have you ever heard of Turtle soup?” But try as I might some folks seemingly will always be caught up in the breakout entry value of 20 as a Holy Grail.

  5. Hey Mike-i use trend following and i have never used 20/40 day breakout systems.
    In my opinion the entry into a trend is just part of the equation with precise exit points being vital and based on volatility position sizing and psychology.
    Even “fundamental” traders like Jim Rogers follow trends in essence and have exit plans
    The research and work that goes into such systems is never ending in my opinion in order to get that “edge”

  6. Hi Micheal,

    Thank you for answering my questions regarding my concerns. However, I feel that you have misunderstood me. If I did not believe in trend following, I would not be a trend follower.

    I am not attempting to find the holy grail breakout because I am smart enough to know that it does not exist. I just wanted to investigate the issue simply because I was curious. Basically, if twenty day breakouts do not work like they used to it would indicate that markets consolidate for longer periods of time and at wider ranges than previously. What is making them consolidate longer? Basically, this means that markets have changed slightly.

    I have had sometime to think about what you said about government manipulation and have to say that you are correct. Thank you for helping me to see it.

    Looking forward to your documentary,

  7. I think you would be better off testing a system across a wide range of portfolios and parameter values, and in different time periods, to see how different entry lengths affect your system’s performance. Having a debate about 20 or 19 or 18 because someone said “20 is bad” is not productive in my view.

  8. And markets are always consolidating (not trending) or expanding (trending). That’s nothing new. Just because markets were consolidating 20yrs ago certainly doesn’t mean they’re consolidating today. You could have made a fortune trading 20-day breakouts on crude in the last year or two.

Comments are closed.