I would like to sincerely thank you for your massive contributions to the world of finance. I have been listening to your podcast for almost a year, and I just read your latest edition of Trend Following. Each of these has been life changing. The views expressed in each piece of work make me feel both encouraged and uncomfortable.
I am encouraged because many of your trend following and life philosophies match my own. I am uncomfortable because some of them are the exact opposite of my own.
Being that discomfort creates growth, I am excited about further exploring the views that make me feel this way. In that spirit, I would like to ask a question or two about how my current trading system does not match up with some of the trend following principles,
1. As a rule, I do not short companies whose PPE outweighs their market capitalization. My reason for this is that they become prime candidates for acquisition or restructuring which could really hurt my short position. Do you have any rules in your system where fundamentals or external factors will cause you to not take a position even when the trend is strong? Do you think any kind of rule like this is justifiable?
2. I currently use a 5% trailing stop to exit a winning trade with 10%+ profit. After reading your book, I think this is too conservative. What are your thoughts on the use of trailing stops to exit winning trades?
I know that you are a very busy man, and I will not be offended at all if these questions go unanswered. I will continue to listen to older episodes of your podcast and read more books on trend following in the hopes that I can find them myself.
Keep up the great work. Your passion shines through and is very inspirational.
Thanks for your nice note.
Let me ask out of the gate: Why the need for fundamentals, a trailing stop and a profit target?
Let’s start there.