My guest today is Yaron Brook, an Israeli-American entrepreneur, writer, and activist. He is an Objectivist and the current chairman of the board at the Ayn Rand Institute, where he is the executive director.
The topic is liberty.
In this episode of Trend Following Radio we discuss:
Trading
The nature of altruism
The idea and definitions of selfishness in the context of objectivism
The power of ideas
The idea of being a victim
Schools, teaching, and political teaching
Entitlement leading to victimhood
The rise of state power, the ambitious poor, and the minimum wage
Free work and internships
Alan Greenspan
America compared to Singapore
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Hi Michael, I’ve been trading trends the last 3 years and it’s been good. However, whenever I revisit Market Wizards or listen to your podcasts, I always notice that some of the great traders, including the trend followers, have some fundamental aspects in their trading plus the use of technical indicators other than price. If trading is merely trading numbers and price action is really what matters, is it foolhardy to think that trading without charts(just daily closing prices and nothing else) can be profitable? I had manually churned out a set of performance data based on some EOD price charts of the last 15 years. But I’m planning to work on evaluating my trend following system using only prices and no charts. Is there someone who has traded trends profitably without charts? I appreciate your entire work of trend following. Thank you! Warmest regards, Francis T.
The core trend followers in my books? No funnymentals (Ed Seykota term of course). None of the trend followers in my books talk about charts. They use price data. Do charts help? That’s all subjective! Price is objective.
Markets go up, down, and sideways. They trend. They flow. They surprise. Have markets changed? Not only have markets changed, they will continue to change. Check your history books. If you have a valid market philosophy, learning to accept that change and flow with it is your greatest asset. No matter how ridiculous market moves appear at the beginning, and no matter how extended or irrational they seem at the end, following trends is the rational choice in a chaotic, changing world.
That thinking leaves trend followers as generalists when it comes to their trading strategy and that’s not easy to accept for many. The dominant trend within universities is ever-narrower specialization. A higher premium is placed on deep knowledge within a single field (read: fundamental expertise in one market), versus broad wisdom across multiple fronts.
For example, one trend following practitioner started trading trends in 1974—making hundreds of millions in profits and perhaps billions for clients. The major strategic elements of his trend following trading systems have never changed. He was blunt: “The markets are just the markets. I know that is unusual sounding.”
Occasionally, someone trying to promote something or start a debate will argue that trend following has to change due to changing market conditions. Specious. The root of trend following is based on responding to change. It is designed to be adaptable.
Does that mean every systematic trend trader will take the risk of shooting only for huge returns? No. Does that mean every trend trader will capture a trend in the exact same way? No. The trend following way has many practitioners and many recipes. However, just as there are thousands of car models, they are still cars.
When you buy something, you want it to go up. When you sell something, you want it to go down. The chance of entering the trade correctly is small, but the chance of exiting the trade correctly is smaller. The chance of being right on both entering and exiting is the smallest. With such diminishing odds of coming through with a completely correct and, therefore, profitable trading campaign, the fewer decisions you make in the markets, the more profitable your trading should be. How many people actually get to sell at the top or buy at the bottom? At most, a handful in each reversal area. First, you must be a market follower, once the market has told you want it wants to do. If the market is a raging bull, you have no alternative but to buy. If it is bearish, you have no alternative but to sell every time you get the opportunity. Let the market tell you what to do. To do otherwise is to try to control the markets-something that is only reserved for God and natural disasters. Secondly, selling at the top and buying at the bottom does not guarantee profits. How many times have you heard of traders who managed to sell near the highs or buy near the bottoms, only to miss the ensuing move completely.
Read that back in the day. I need to see if William might appear on my podcast.
One of the most useful criticisms that you can use to further your understanding centers on prediction. Trend followers… do not predict a market’s timing or distinction. Trend followers react to market movements. It is a critical distinction best seen in the words of trend follower Bill Dunn, “We don’t make market predictions. We just ride the bucking bronco.”
For more information on books and other resources to further your trend following education go here.
Hello, I am currently a college student, and am very interested in learning about stock trading. I just listened to your interview on the Tropical MBA podcast, and it was great! As someone who is new to stock trading, with little experience, where should I start? Any advice from you would be greatly appreciated!
