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The Origins of Trend Following: Created by Curiosity

Many stumble onto trend following due to simple curiosity. An excerpt from Trend Following:

Can you remember how to experience simple childlike curiosity with no agenda other than simply to know? The curiosity I am talking about is open-ended and enthusiastic. Kids have the same wide-eyed wonderment when they take apart their first toy to figure out how it works.

Emotional issues aside, many traders remain fixated on academic intelligence as their only decision-making tool. William Eckhardt, a longtime trend follower, sees the issue:

“I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few are not. Many outstandingly intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”

When it comes to outstanding trading, emotional intelligence is as important as IQ. Because we are conditioned to appear “book smart,” we are often afraid to be curious. We think that by asking questions, we’ll be perceived as ignorant; although in truth, by not questioning the world, we get into more trouble. Still others might not fear the question, but instead fear the answer, which might be the piece of information that requires integration into your life or worse, information that proves you wrong. Open ended curiosity lets you take a step back and see everything for what it is right now.

For most of our lives, many of us spend our time listening to someone else feed us information. Then we are judged on how well we can regurgitate that information back to whomever offered it in the first place. When it comes time to taking responsibility for our decision making, we are constantly waiting for someone else to tell us what to do or checking to see what others are doing. Curiosity has been pulled from us.

Now feedback from a listener:

Hello Michael,

First I’d like to introduce myself. My name is Terry. I hope this doesn’t sound stalker-ish but it seems we have some things in common:

  • I know you lived in San Diego for a while. I was born and raised there.
  • I know you started your journey throughout Asia in February of 2013. I took mine in March of 2013 (Albeit, much smaller. I only traveled to Hong Kong, Thailand and Vietnam).
  • I’m still working my way through your podcasts but I think you’re still in Saigon, is that correct? (I really liked that city). I now live in Chiang Mai, Thailand.

It’s interesting how sometimes everything just seems to come together in life. I was introduced to Trend Following by a value investing newsletter writer, of all people. His name is Tim Price. I think I heard you read something of his on a podcast. Anyways, he dedicated a whole issue to the concept of Trend Following and even showed the proof that it works. His bottom line was that he wasn’t changing his methodology but thought that investing part of a portfolio in a Trend Following fund is a good way to diversify.

He had a link to turtletrader in that issue and that is how I was introduced to your materials. I immediately felt like I was home. I’ve dabbled in futures trading in the past as well as options trading. I even studied under Larry Williams for a while. I never did get the hang of “predicting” trends with chart patterns though.

Over the years, the majority of my investment money was tied up in a 401K. Of course, I lost 50% of that in 2008 like many others. I vowed I would not let that happen again and began using a crude form of Trend Following (I didn’t know the term then) using a 2 SMA crossover system. I took signals from that to move money in and out of equity funds. I admit I was sloppy with it and could have done better but I managed to build it back up to where it was before and then some.

I left my job when I moved to Thailand and I now have those funds in a self-directed IRA. I’ve done a little value investing with it using newsletter recommendations (I did pretty well that way with a small Roth IRA). However, after getting into your materials I’ve come to realize that it’s just another form of buy and hold. I receive some good recommendations for what to buy, but no exit strategy other than waiting for a sell recommendation.

So as I said, I’m still going through your podcasts (I feel like I’m getting a college education with all the great guests you have) and I’ve read The Complete TurtleTrader as well as Trend Following. (I posted reviews on Amazon)

Now I’m still hungry for more. I intend to read your other books but I’m anxious to get going with this and purchase your Flagship training. I guess I still have a little of the value investing mindset because I’m now going to ask you for the discount you talked about in your emails.

Let me know what I need to do next. I’m looking forward to hearing from you.

All the best,

Thanks! We are long connected now and I know you are on the path.

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