Category: Holy Grails

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Hi Mike, Just listened to your last podcast. Thanks for doing the podcasts while you are on the road! Trading is a solitary activity, I have not found any other trend following traders locally. I find people just want to discuss fundamentals and sentiment and predictions. No good for the business of non-discretionary trading. So I find listening to your interviews balances that, almost like having access to mentors. I’m always looking forward to the next interview. The monologue episodes are sometimes puzzling however, particularly your negative comments aimed at various groups. This time it was daytraders. I am not a daytrader and don’t want to be, its not my style, but I do know people who earn good profits daytrading. But why should you or I care if they have their eyes glued to the screen, its their own choice and it doesn’t effect us. I’m assuming your long term aim is marketing your stuff (an honorable objective, all credit to you for that), but is talking down to potential customers really effective? Also something confused me with your logic today, you make the assumption that any historic data correlated with trend following, must therefore also be derived from trend following. But could daytrading profits also be correlated? eg. Oct 2008 trend following was profitable, but surely daytraders would also be short as markets were consistently directional downwards, so they would also be profitable from the high volatility. My logic might be wrong, let me know. By the way I’m a big fan of your books, and recommend them at every opportunity. Most of my foundation concepts came from reading “Trend Following” about 3 years ago, but I also liked “Trend Commandments” for clarifying the whole TF mentality.

Regards,
Mike B.

In my books are performance track records of trend following traders. Audits. Where are the day trading records like that? My passion is to take what I know and pass it along. Clearly, I am not the only one who shares that day trading view. You are aware of Ed Seykota? Why would potential customers be offended by my comments? Confused. Also, clarify your point about correlations? Not following that logic.

Hi Mike, Thanks for your reply. Why could they be offended? “They have personal issues they try to resolve by daytrading…” Did you mean that in a complimentary way? But I don’t disagree with your Ed Seykota quote about daytraders. My point about marketing is that getting a negative gut reaction from potential customers doesn’t usually result in them reaching for their wallets. Its not offensive to me, I’m not in that group. Personally I prefer to only make decisions once a day, and play more golf! This is how I see the relationship between trend following and daytrading. I view all market activity (all time frames) as driven by two character types, either momentum/TF or reversion-to-mean (RTM). The RTM guys include value investors, most analysts, and most media commentators. Any healthy market needs both TFs and RTMs, but each individual person can’t be both. In sideways markets you can’t tell the difference, but when prices are moving into new territory thats when the two types polarize. When price is making new highs/lows TFs want to be in the trend direction, and RTMs want to be opposite, and the trend stops only when RTMs overwhelm the TFs. But those same two drivers come into play when medium-term traders look at a daily chart, or when daytraders look at a 5-min chart. A daytrader can have a TF style (buying new highs, etc). The difference is the speed, the intensity, and higher probability of being knocked out by market noise. Anyway, you’ve been doing this much longer than me, I could be wrong. So thanks for letting me voice an opinion. Enjoy the rest of the weekend!

Cheers,
Mike
Calgary, Alberta

Thanks Mike for the thoughtful note, but let me be even more stark:

1. Day trading track records don’t appear to exist.
2. If a strategy is faulty, or doesn’t work, or there is no proof, why would you keep hoping for it to work or imagining it to work? Yes, that would lead to Ed Seykota’s conclusion about “issues” that they need to work on.

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