My guest today is Tom Basso, the trend following trader famously featured in Jack Schwager’s “New Market Wizards”. Basso is a hedge fund manager. He was president and founder of Trendstat Capital Management. Trendstat was closed in 2003 when assets under management fell to $65M. He is the author of two books, Panic-Proof Investing and the self-published The Frustrated Investor. In 1998, he was elected to the board of the National Futures Association. He currently runs enjoytheride.world, a website dedicated to trader education. He is also the chairman of the board of Standpoint Funds.
The topic is Trend Following.
In this episode of Trend Following Radio we discuss:
- Video of philosopher Alan Watts
- How Basso manages his emotions during both losing and winning periods
- What drove Basso to “enjoy the ride” and whether there were periods in his life when it was difficult to do so
- Exit strategies on winning positions
- Basso’s use of hedges
- The process behind taking a developed system from testing to live trading
- What Basso learned from his earliest large drawdown
- Basso’s use of money management and risk control
- Basso’s advice to the first time programmer
- How to handle skeptics of trend following
- Whether Basso considered the notion of serenity from the very beginning of his career
- The career of John W. Henry
- Basso’s coin flip entry method, and the importance of exit strategies
- Percent betting
- Diversification
- What would cause Basso to stop trading a particular system
- Comfort with uncertainty
- Basso’s views on initial capital at risk vs. unrealized gains
- Fighting against your gut reaction when your system tells you otherwise
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