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My biggest challenge is extreme market volatility. Which means setups go haywire and you have no clue how long the market is going to be against you. So in utter despair, you exit with a loss every time these keep adding up. So with good money management, the losses are small but you don’t make money.
Regards,
Sudip G.
Let go of the day trading. First step.
Note: This reader said he was trading 5-minute bars.
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.
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My guest today is Bruce Usher, a Professor at Columbia Business School, where he teaches on the intersection of financial, social and environmental issues, and is a recipient of the Dean’s Award for Teaching Excellence. He was previously the co-founder and CEO of TreasuryConnect, which provided electronic trading solutions to banks and was acquired in 2001. Usher is an active investor and advisor to entrepreneurial ventures focused on climate change and clean energy, and is chair of the Tamer Fund for Social Ventures.
The topic is his book Investing in the Era of Climate Change.
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Big fan of the podcast. Wanted to say a huge thanks for helping build my motivation to dive to trend following properly after dabbling for years. Larry Hite and Tom Basso are my favorite guests! So much wisdom there.
The biggest challenge that I’ve faced with my trading is wanting to be right and expecting perfection. I’m finding that implementing systematic trading has for me improved that situation dramatically. I’ve seen myself do really stupid and expensive things when I’m too close to the market and end up fighting reality like some kind of monkey. I love being able to build a system and then step back and let it do its thing. I can see that my next biggest challenge is going to be avoiding needless tinkering with systems that have a long track record of robust performance.
The best thing that I can say about these challenges is that they have helped me to build a bunch of awareness of my limitations, resilience to get back up and keep going and lastly, it has forced me to reassess how I do things. That ultimately led me to becoming a trend follower.
For context, I’m currently in a drawdown since January 2021. I didn’t adapt what I was doing (or cut size of my trades!) as fast as I needed to as the market changed. I can now see how adapting to a changing market is completely taken care of by the standard trend following rule-set so I’m glad to have seen the light and to live to fight another day!
What trading strategy (and time frame) has kept you in a drawdown for 2021-2022?
I was trading breakouts with long call spreads on equities from April 2020 and that worked well enough for me to feel comfortable leaving my job in tech and move back to Australia mid-pandemic. I realised at the time that it was a super tail environment and was happy to get aggressive while it was working.
In January 2021 I tried to ‘diversify’ because I suspected that the environment would change. I started with a signal service that led to my single biggest loss ever due to me getting over-confident and way over-sizing the trade. This was after 2 other big losses that I created in new systems that I was trying to use to diversify (and trading with too much size).
In the first half of 2021 I was still trying to trade breakouts in an environment where they were consistently failing, I lost my objectivity and began trading poorly. The big drawdown happened between Feb and May 2021 from basically 3 trades. From there I cut my size and started to look for a new solution. I’ve bounced around a lot and made a ton of changes (mostly focusing on cutting my losers MUCH faster and building automation to get me away from the screen).
I appreciate your interest and any observations, thoughts or challenges that you would be willing to offer.
So you were not a trend follower while you have been in a drawdown in 2021-2022.
How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.
Also jump in:
• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us
Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.
Subscribe to Trend Following Radio on iTunes
Please enjoy my monologue The Carvana Fantasy with Michael Covel on Trend Following Radio.
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Hello Michael, I’m reading your fifth edition of Trend Following. I’m reading the interviews, the one with Ewan Kirk. These people are talking as if trend following was discovered by computer programmers in the 1980s. I’ve been trading for fifty two years and I’m here to tell you that this is just not true. Richard D. Wyckoff and Jesse L. Livermore were trend followers almost one hundred years ago. The big money is in the big swing. –Jesse L. Livermore. The most important thing you can know about the market is it’s trend. Richard D. Wyckkoff in his course stock market science and technique first published in 1932. I bought a Kroll wilder long term trading system. As a trading system, it was worthless. It was a reversal system that kept you in the market all the time either long or short. In the trading ranges it got cut to bits. It didn’t even use the correct data. It used something called a perpetual contract. Whatever that is … I once went to a seminar in Chicago with Ed Seykota. I thought Seykota was going to teach me something about trading commodities. Instead, he taught me some deep breathing exercises that he called Zen on steroids. At dinner that night, he took a chart out of his pocket and showed it to me. This is the kind of chart I like, he said. As a Wyckoff student, I recognized the chart as a long term chart. That’s the only thing Ed ever said to me about trading. I finally had to go back to Wyckoff and Livermore and give up this nonsense. I was spending a lot of money listening to people tell me about the market and slowly going broke. I came to believe that if they knew anything about trading they would be trading and not trying to sell me a trading system that had 85% winning trades. If their trading system was so good, why didn’t they trade it and make a fortune? Why were they trying to peddle it to me? When I spent two years learning the Wyckoff method of stock market science and technique, the only technical indicator we had on our charts was momentum. I still use it to this day. In 1972 we had to update all our charts including point and figure charts by hand. It is much easier today with a good trading platform and a good chart service. But, I’ll go to my grave believing that the most important part of any trading system is the person operating it. Give any trading system to any ten people and tell them to follow it and at the end of the year, you will have ten different results. Any trading system will make money if you can sell enough of them. In my original career, I was an airline pilot for 35 years. They tried to do the same thing in aviation. These people thought it was a good idea for the computer to be able to over-ride the pilot. You know, pilots are humans and therefore prone to error. And, as far as flight instructors were concerned, you soon learned they would teach you nothing. They were too busy showing you how much they knew about airplanes and flying to teach you anything. I used to spend months at home learning a new airplane before I went to school on it because I knew the only thing the instructors were going to do was see if you knew it. Trend following is not the holy grail that was discovered by Ed Seykota and Larry Hite. They just found a way to automate some of it. And neither one of them can teach anyone else how to do it. Trading is something you learn by yourself. It takes knowledge, experience, and you need a flare for it. And my final thought is that you can make an easier living as a financial entertainer than you can as a trader. I’m thinking of Jim Kramer and the CNBC eye candy. Gotta go. I just got stopped out of Dec. Wheat!
Happy thoughts,
E. Allen Hine
Thanks for the detailed feedback. Some clarifications:
1. Wyckoff falls more into the predictive TA camp v. reactive TA camp (trend following). That’s no small difference. Point and figure and price action trend following are predictive v. reactive (see chapter one of my Trend Following book).
2. The most important aspects to trend following are:
• Exact rules for selecting your tracking portfolio.
• Exact rules for entering your trades at the right time.
• Exact rules for exiting your trades with a loss.
• Exact rules for exiting your trades with a profit.
• Exact rules for how much money to bet on each trade.
Those rules don’t outline “trend” as the most important thing. Those rules capture trends.
3. Trend following can be learned. Richard Dennis proved that with the turtles. Many other examples exist. The reason that my trend following book has caught fire for all these years is that it shows with data that unaffiliated traders around the world produce similar trend following returns.
4. I am well aware of early trend following influences, but it eventually morphed to a very particular style as evidenced by the performance data. Early influences.
How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.
Also jump in:
• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us
Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.
Subscribe to Trend Following Radio on iTunes
My guest today is Martin Bergin, the president and owner of DUNN since 2007. Bergin oversees all mission-critical operations of the firm, including the firm’s research and development efforts as well as the construction and management of the firm’s managed futures portfolios. He joined DUNN in 1997 as Accounting Systems Manager, and was promoted to Vice President and Chief Financial Officer in 2001. Prior to joining DUNN, he was a partner at a Northern Virginia CPA firm where he worked for 10 years managing audit, tax and consulting engagements for clients in the managed futures, banking and defense industries.
The topic is Trend Following.
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