Michael,
I hope this finds you well in Asia and that you have a little patience in reading my email. Patience because I am not good at writing. I felt I owed you this note. Your book has and is changing my life.
My name is Craig R., I am in my mid 50s an African American with no degree (only important to show anybody can do anything they want in this life, if you put in the work). A 35-year real estate developer, having built over 500 single family homes in my career. I have lived in Los Angeles for all of the mentioned 35 years. I was born in DC and grew up in Columbia MD, not too far from you in Virginia.
I started trading more than 25 years ago. A real estate investor who invested money in multiple projects asked me to lunch. At lunch, Michael S. told me he could teach me to trade for a living (turtle style). Michael was very impressive. At that time his primary home was in Belair and it overlooked the entire Los Angeles city basin. He also has a weekend beach house on the sand in Malibu. Mike was a licensed Attorney from Chicago, who never practiced law. He had an uncle who had a seat on the CBOE who taught him to trade. Mike taught what I now understand to be counter trend strategy. He taught rule based trading and was a very good mentor/teacher.
He charged me $50,000. $25,000 upfront and 20% of my profits until I paid the balance. He said I did not continue to need him; he would no longer require me to pay part of my profits. At that time we only traded the big S/P and then emini. Because of my success in RE I wanted to open my account with 100k. He advised against this and had me start with only 10k. Of course starting in the mid 1990’s I ran the 10k up to 1M plus in 30 months. I was probably risking 10% of my account balance per trade. I gave it all back in 90 days. He did not teach me position sizing. Nor did he understand as I do know that trading only 1 market is not very smart. More to come. Michael and I are still very good friends and we speak 4 or 5 times a year. He still uses me as a referral and I am glad to do it for him. He still trades and teaches; he now lives on the east coast. I have tried discussing my trading transformation with him but now in his 80’s he is not looking for new ideas.
My second mentor/teacher was the great Dr. Van Tharp. (I have listened to most of your recent podcasts, but I have not heard you mention his passing.) Prior to your books, Trade Your Way To Financial Freedom, The Definitive Guide to Position Sizing, and Super Trader were my 3 favorite books ever. I have read over 100 trading books. It was hard for a guy like me to be able to weed through the bullshit and to be able to find substance.
I went to North Carolina and took his 101 and 102 courses 15 years ago. The other things I take from Dr Tharp:
1. The Marble Game. I played it 10,000 times. I learned you can have 35 out of 40 losses and it does not mean your strategy is bad. Statistics! Streaks of losers lead to winners. You wrote that, paraphrase.
2. True average range. Like a golf course you have to have the right club or iron to know what to play based on the length of the hole.
3. The discipline of rule based trading. Cut risk at all costs.
4. Risk (R multiple). The key to it all.
At this time I was still trading counter trend strategies, I don’t think I understood the term trend or counter trend. But I did understand I needed to take the emotional component out of my trading. What the marble game taught me. Losing 25 of 30 trades is taxing on the emotions. I believed a trading plan can be verbalized, if that is true it can be written down on paper and if that is true I could have it programmed. This would allow me to trade many markets at a time. MY HOLY GRAIL.
It took me at least 5 or 6 programmers and 8+ years to build my first EA. It was based on 15+ years trading a counter trend strategy, big mistake. My first EA consisted of over 30,000 lines of code. I was told it was like a 300-page book with every line filled. It never worked and I was trading the dreaded 15 min bar. The market will take from you as long as you let it. It doesn’t give a fuck. By this time, I moved to the Forex, trading the big 8.
Mentor #3. I found a Los Angeles based teaching mentor Steven P., a 40+ year trader who traded as a specialist on the Pacific Stock Exchange. My major points of clarity. Counter Trend. He would say don’t fight the tape. (Never ever said trend trade, neither did Tharp.) He holds weekly zoom’s selling products to entry level traders. But I have long had the attitude that if I watch a zoom, go to a day-long webinar or read a book and take anything away to add to my trading prowess it was worth my time. He taught me the only indicator I use, it’s in every strategy I build. The BUY/SELL line, 50 day simple moving average. He gives this tip away, so I have no issue sharing. I won’t buy if the market is below 50 SMA and I won’t sell if the market is trading above. To all the buy and hold geniuses this is the only tool they need. I had subsequently built many strategies in different time frames. They have all been profitable. From 2018 to mid 2020 my partner and I made over 1400 trades (15 min bar) winning only 22% of the time. Average winner 8.25R. 100% systematic. I was starting to abandon the counter trend moving towards something new. I did not know what it was!
Quick story. November 2020 I heard a podcast with Dr. Tharp and your homie Tom Basso. At the end, Tom said he could be found on Facebook. I had not been anywhere near Facebook for 10+ years. Early 2020, I was up 200% +. That Oct/Nov I found myself down almost 40% from my high watermark. I was trading about 1.4m me and my partner’s cash and for 4 or 5 friends and family. I had just raised 1m from one guy and of course I started taking it in the rear. Still trading short time frames, overtrading. Anyway, I looked on Facebook and I found Tom’s FB page and sent a message. I typed my scenario and asked him his thoughts. To my surprise, he responded within 10 minutes stating he would prefer to talk on the phone. He said he had time and could talk NOW. I thought shit, I am not ready and I asked if we could speak this time tomorrow. I wanted not to waste his time and write down my thoughts. He said no problem. We spoke for an hour the next day. He asked us to tell him what I was doing. He said after listening for a while, hopefully, faster than this email is taking. He said I was going to be fine and that I got how the game worked. My main issue, I wanted his opinion on whether I should cut my risk in half to ease the drawdown. He told me he wouldn’t until I got back to even, and he was right. I got the 40% back within 45 days and made a new watermark. I did lose the new 1m guy. I thought I had prepared him for the risk at hand. He blamed his friend who traded with me who referred to me. Oh well. And I did send a copy of the statement when I made a new high.
Finally, Mentor #4. 3 plus years ago 2019ish as we were moving into Covid times, I found myself with a lot of time to dedicate myself back to trading. I have always had a trading presence. I have traded 65% of the time over the last 25 years. Anyway, somehow I found your turtle book … I then read your Turtle Book and although I enjoyed it I wanted more. This led me to MY NEW TRADING BIBLE. Replacing Tharp’s book as my favorite Trend Following, your turtle book, and now your book about Tom are changing my life.
Do you know the movie Angel Heart? Mickey Rourke’s character Johnny Favorite discovers during the movie that he is not who he thinks he is, and that he owes his soul to the devil, Robert De Niro. After reading your books and having traded for more than 25 years I finally know who I am. I am a TREND FOLLOWER. I am not a day trader or any other nonsense someone may want to call me. I know who I am.
The market does not care when or if you ever solve the trading puzzle. And it is a puzzle that may never be complete. That’s why it is so much fun. I read Trend Followers every year. I enjoy reading all my favorites each year with a different color highlighter. I am amazed at what I discover each time I read that I did not catch prior.
It should be noted and I have asked a couple of my mentors, none of them used or defined the term Trend Follower. I had never heard this term prior to reading your books.
This time last year and a half I have built what I think is my Trend Following masterpiece. I have come to the personal realization that although somewhat profitable, multiple strategies and trading short term time frames was not utilizing my best opportunities in the markets. I am 100% agreeing with you. I am now trading 2 EA’s 100% systemasticly. Both are based on trend following. 1. short term swing trade(4hour) clock when I deem the market is not trending, 65% of the time. A winning trade lasts around 5-8 days. My position trade, 1 day chart. I am currently trading in 15 markets. I am only in 3 trades as of this writing. I am up almost 300% on the year. I made 55% in the 1 week ending October 14th, I had 9 positions 2 weeks ago. I have made 2 additional major changes in my trading this year.
1. I have created a mechanism to turn off a sideways/non trending market.
2. I am still a work in progress, trying to capture unrealized gains. I risk 1% per trade but I need to protect my profits when I am 10R+. I typically liked to stay out of the way and let the market do its thing. I am reworking some things in this regard.
Lastly, as a huge fan. A couple final thoughts.
1. It would be great if you created a trend following conference, annually or every other year. I would come anywhere on the planet to be there.
2. Your books are legendary for those that can get and understand. You are changing my life. Thank you.
3. If you ever make it to California or the West Coast look me up. I would love to buy you the best dinner we can find.
4. Larry Hite is the coolest.
I hope my writing has not been too bad.
Sincerely,
Craig R.
