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You might like my 2017 epic release: Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets (Fifth Edition). Revised and extended with twice as much content.

12 thoughts on “Patience

  1. Well, it all depends at which end of the timeframe you’re looking at…

    You might well be giving back lots of open profit as the trend reverses (on a long-ish timeframe basis) – which is when Trend Following discipline is beig tested…

  2. A lot of these profits will reverse. My system went short a lot of the European index futures and long all types of bonds over the last couple of days. I doubt the gains will hold although I wish they did.

  3. Reason trend following is hard to follow (and probably why it could work over the long term) is that the three possible outcomes for every trade a TF system takes are:

    it results in a quick small loss
    it results in a small profit turning to the small loss
    it results in a large profit turning to a smaller profit

    and most of its money is made in the rarest trade in which a very very large profit turns into a large profit

    This is why psychologically it is very hard to
    follow the trend following systems trades and probably 98% of trend followers including Richard Dennis either go broke or give up. And because of this, a small error of execution can wipe out a lot and take you out of the game.

    Michael Covel should write more about this aspect, so that small investors realize how difficult it is psychologically to follow and succeed using a TF system.

  4. Ravi, you are misinformed.

    First, the notion that somehow trend following is ‘harder’ or more ‘risky’ than standard issue buy and hold — especially after the last 3 years — is inane (and insane). Everything in life that is ‘good’ is ‘hard’. If you don’t know what you are doing or what you are talking about, yes you will go broke.

    Second, read both of my books — clearly you have not. Maybe you skimmed them, but the detail has definitely not set in. Coming on here, making incomplete statements about Dennis (the complete view on Dennis is here), using made up numbers (“probably 98%”), all the while posing as if you are clear on the subject — makes me smile.

    Third, to all inspiring trend followers: if you think and talk like Ravi there is 100% guarantee you will never make a dime trend trading.

    P.S. My tone is not meant to be angry or overly passionate, but assertive wrong statements (Ravi) need smack-downs occasionally.

  5. Michael

    I didnot say Trend following system is riskier. Did I?

    I said it is psychologically harder to execute because by design trades need to give back profits to close.

    I love your books and trend following a lot. I meant that your books do talk a lot about the potential profits from trend following but need a chapter on how hard it is to FOLLOW the system.

    Did not know there was a raw nerve.

  6. I have understood trend following from your books.

    I like its ‘magic’ too. I was trying to provide a balancing viewpoint. You can feel free to moderate my views.

    The only loophole I see in trend following is the assumption that you can get out before others get out.
    Most of the time you can, and at times when you cant, you can be trapped.

    Seykota says “Trend is your friend until the end where it bends.”
    If it bends slowly, it can still your friend. If it bends before you know it is not.

  7. That day indeed the profits tumbled in for some following trends which some fundamentalists would have disagreed with. But even non trend followers acknowledged the possibilities of certain trades being favorable at present, for the time being,such as Jim Rogers noting that the US Dollar coming into favor (again, for the near-term). Yes, sometimes profits would be given back, but if the trend is there, they will come trickling back in, over time, as an initial wave of profit-taking becomes “ancient” history. AND if those trends were short lived, then others will prove profitable. (Ancient is a funny term when we have HFT and algos with memories of fraction of a second in play.)

  8. Ravi, you have to have a system that works and follow it. It’s a matter of discipline and faith in your system.

    The market did not suddenly fall off a cliff, it was swinging about prior to that, and any seasoned trend follower will appreciate that most uptrends tend to end in violent swings. I honestly believe that most successful trend followers were likely shifting to the short side during those swings. I know I had switched short several days before the crash simply because my system told me to.

  9. Thank you Stuart.

    I am using a price-level based trend following system, but moved to cash just prior to cash – due to volatility going up, with a buy stop above the previous high.

    Thanks for your comments, it is interesting because in the last two days I am contemplating to incorporate volatility and slowing down of trend strength as early detection of a ‘potential’ end of trend. My system uses volatility to determine size and I had read from Mike’s turtle book that trend followers use volatility to decide whether to enter or not, but baking it into the trading is a good idea.

    Of course, there might be days when crashes could happen WITHOUT wild swings, so my exposure will always plan for the worst.

    I cannot help but think that the market is where trend traders take money from countertrenders and volatility-following trend traders take from price-level-following trend traders.

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