David Harding: Trend Following Trader

Who doesn’t want to make a billion dollars? Yes, I imagine there are downsides to that type of wealth, but it must be one helluva ride to produce that kind of success especially from essentially nothing. Is it a reasonable goal for you to make a billion dollars? Well, the odds are probably not on your side for that. However, sometimes in this world, this crazy and often chaotic world of ours, people win the lottery. They buy a scratch-off ticket and win millions. They didn’t practice. They didn’t struggle. They didn’t do anything except buy a scratch-off ticket.

On the other side are people like David Harding. Harding struggled mightily early. However, Harding stuck with it for decades and is now a true billionaire. Don’t get me wrong Harding, like many success stories, has had luck on his side.

However, that’s not the takeaway here. The takeaway is perseverance. The takeaway is not quitting. That’s how Harding really hit it big. Without perseverance, Harding would have had no chance for luck to shine through. What can you do? You can learn to think like a trader who has made a billion dollars. And if you think like him, and if you model how a trader like that views the world, you can put yourself in a place to possibly make your billion. Note, I said possibly.

The real reason, the honest reason to think like a billionaire, is to make your first million. Anyone with guts and determination can figure a way to make their first million, but you have to stick with the ups and downs.

Known as the commodities king (primarily because the press always talk about some of the markets trend followers trade as opposed to their strategy), Harding could be called an overnight trading sensation, only 30 years in the making. His trend following trading has produced, on average, nearly 20 percent a year for 20 years. Let that digest for a second as you ponder the buy and hold investments in mutual funds you may have, slowly eating away at your capital and your sanity.

Who Likes Speculation Anyway

For those lucky enough to study Latin in their youth, you recall the verb speculari, which translates as; to observe. Speculators, while often vilified in the press, are observers, which is very much the position you want to find yourself in as you go about making money in the markets. You want to stand outside of the political and economic system (chaos!) and observe.

The best defense that can be made of people profiting from speculation is George Soros’s defense: “You are playing a game that anyone can play and you play by the rules laid down.” However, once you accept speculation as an accepted direction, determination enters the arena for everyone’s potential success.

Harding’s grandmother used to say, “Patience and perseverance made a bishop of his reverence.” Harding opined, “Determination is the same as having wings. If at first you don’t succeed, try, try, and try again. Madonna always says, “I’m like a cockroach. Meaning, no one could kill Madonna.”

Success is Not Always Easy

Recently David Harding was asked: “You’ve attracted quite a lot of new money into the fund since you’ve launched, but particularly in the last couple of years. Why is that do you think?”

Harding’s response:

I think that the market has bought what actually is quite a complicated story. The Winton story is not a simple story. In our early years we were impeded by the terrific performance of dot-com stocks. Later people became very attracted to certain types of hedge funds, which produced very smooth and steady returns; something which we’ve never purported to do. And, to be honest, as I said before, the Winton story, obviously I believe in it, but it isn’t simple and I’m not that surprised that it took the market some time to show considerable enthusiasm for it. But now that the story has been got across better, people are, I think, realizing that Winton is a good horse to back in the race to try to find genuinely talented hedge fund management companies.

Harding’s comments about the dot com bubble might seem dated today, but they are not. That “bubble” caused a great many people to take bad steps with their portfolios and years later many still have not learned the lessons.

Winton Capital

Winton’s investment technique consists of trading a portfolio of around 60 contracts on major commodity exchanges and forward markets worldwide, employing a totally computerized, technical, and broadly trend-following trading system developed by its principals. This system tracks the daily price movements from these markets around the world, and carries out certain computations to determine each day how long or short the portfolio should be to maximize profit within a certain range of risk. If rising prices are anticipated, a long position will be established; a short position will be established if prices are expected to fall.

David Harding appeared in Michael Covel’s film “Broke: The New American Dream”.