“I Like Trend Following, But Please Tell Me A Story Too!”

From a reader commenting on my recent post:

“Michael – the story gets worse – I think you and your readers will enjoy this tale of mine. (I usually post under my own name, but this time anonymous). We are a fully systematic trend following FX fund here in Europe with a quite a long and successful track record. Each month we have to produce a newsletter with a paragraph describing the previous month. For years I would use this to promote the philosophy of systematic trend following using only price as input with no interference, etc, etc – similar to what you are doing here. However, increasingly there has been a growing demand from new and prospective clients to see more “fundamental reasons” for our trading! They want to get a sense that we are indeed “experts” in foreign exchange! That we “know” what is happening in FX every month. So now I have to go back every month to find some of the more significant winning (or losing) trades and then somehow try to “find and fit” a reason why we made a profit in such and such a trade! In some cases the reason for a particular move emerges well after the fact, and sometimes, not at all. In some cases the market moved exactly opposite to the apparent fundamental conditions. Apparently our years and years of research and expertise in system design, trend following and money management techniques and the like, is worth nothing. Sometimes we feel as if we live in a parallel universe. Sometimes it feels as if this industry will never grow up. The worst of it is that these individuals have never, and will never be traders or fund managers themselves. However, they are the gatekeepers and allocators in the industry. The so-called wealth managers, family office managers, fund-of-fund managers etc. These are the decision-makers in the industry that decide on funds like ours. Thank you for your hard work and excellent blog. You remind us that we are not alone. All the best.”

Thanks for the note. I have noticed this too — across many trend traders.