The Trend Following Research Process

Our firm helps students by performing onerous research work for them. That means flying hundreds of thousands of air miles gaining an audience with the great traders. Sitting down with them, learning from them and figuring out what they do to make their massive trend following profits is our research process. You get the facts and wisdom of these men and women first hand. No other firm has put comparable time, money, energy, and research into trend following. It has been a 15-year (and counting) pursuit to find every valuable piece of research available to share with our students.

Are you going to do the research? Even if you wanted to, could you? Our firm simply asks: Would you like to read over our shoulder and see our core research? Wouldn’t you like to know exactly what is important for making money? Our firm brings it all:

  • Independence.
  • Credibility.
  • Behind the curtain, i.e. inside baseball.
  • Persistent at digging for details.
  • Thought leader.
  • Not mainstream.
  • Passionate fighter.
  • Authentic work found nowhere else.

What can you expect exactly from our research and education?

  • Performance: Financial freedom. The great returns you can find over the last 50 years are trend following returns–the proof exists.
  • No prediction: Generate algorithms that ‘predict’ unpredictable market movements? Forget it. Impossible. If you see anybody promise they can predict tomorrow, watch out. If someone tells you that some market will move by some amount by sometime in the future–walk away. Top trend following traders do not predict tomorrow. They react to market movements.
  • No stories: Mysterious behind the scenes factors, which may or may not cause markets to move, are not relevant. People love stories about the market. Cocktail parties are filled with people tossing around exciting stories all designed to make you think that they have figured out a market direction. Stories and stock tips are nothing but an attempt to generate ratings and create income for those predicting.
  • Vacation trading: Means of market profits: laptop + Internet. That means minutes a day, off the grid, desert island trading and trade anywhere. Take a vacation or business trip away from home or the office while your automated trading systems are running.
  • Buy and hope: It is natural to assume that the law of gravity should also apply in financial markets. After all, isn’t the oldest piece of investment advice to buy low and sell high? You can go broke doing that.
  • End-of day systems: You don’t have to sit in front of a computer to trade. You can use daily bars for trading decisions. You will know before the open of trading whether there is an order that day. You can place all orders before the market opens. Once the orders have been placed, you don’t need to monitor the market the rest of the day. We all like more time for the fun things in life.
  • Trade trends on all markets: Just trade the ‘numbers’–it’s mob psychology. Jump on board with the trends once they start. Think about it: Prices must ‘trend’ higher from where a trader bought, or they must ‘trend’ lower from where he sold to make a profit.
  • Timeless v. timely: You want to have a trading strategy that worked 50 years ago or 40 years ago or 30 years ago or 20 years ago or 10 years ago or five years ago or one year ago. You want timeless principles that work no matter what particular market is moving, and regardless of if it is moving up or down. Is that doable? Absolutely.
  • Library: Our exhaustive research and massive repository of insights on automated trading system development is regularly sought by some of the most successful professional funds. Thousands of pages of research, combined with thousands of minutes of audio has been assembled–that cannot be accessed on the internet. In fact, if your trading education is coming solely from a Google search–you are in trouble.
  • Think probabilities: Winners think about how much they can lose. Losers think about how much they can win. Those simple words are mission-critical. Thinking about how much you can lose in specific mathematical terms is the dividing line between winner and loser. You always hear somebody talking about the big home run they’re going to hit, but the winners always worry about cutting back on their strikeouts. They know the home run will come if they focus on their downside or what they can lose.
  • Strategy: Making money in the markets isn’t about trading technology or software. It’s about ideas. It’s about a mindset. It is critical for you to not look at all information, but rather learn how to weed out the information that actually matters, what is relevant. Trend trading is all about opportunity taking not opportunity making. Think and act outside the herd. If you don’t have a strategy, if you wake up each day like the millions of panicky sheep who are scared they might miss something, petrified they don’t know something–stop now because you’re not going to make it in the markets.
  • Your workstation: How to set up your own trading desk. Hint? It doesn’t have to be complicated. Every person, and their trading, is unique. Not every workstation will be the same for everyone. There are literally thousands of different ways to set up a trading workstation. You can go three monitors and a big desk or you can go iPhone/iPad. Trust our insights.
  • Money management: Even if your entry and exit points are 90% accurate, if you risk it all on every trade, at some point the odds are substantially in favor of you losing all of your money. By the same token, a system that is only accurate 10% of the time, but one that has proper money management, could mint money. This deceptively simple way of trading makes it possible to catch all major market trends. The critical issue is not necessarily when you enter–the critical issue is how much you bet on each trade given that you have limited capital. Every trader–small or large–has to be worried at all times that they don’t over bet. If you over bet, if you risk too much, you are going to go broke–it is guaranteed.
  • Fully disclosed: Our trading logic is fully disclosed so you’ll know exactly why each trade is being placed. This is not a black-box system.
  • Robust: You don’t need to learn dozens of indicators and theorems. Great traders concentrate on the core concepts. Automated systems are always about keeping on the right side of the market.
  • Portfolios for any account size: You won’t have to do complicated analysis to determine what to trade–there are specific rules that you can learn to have a proper portfolio ready to take advantage of the next big surprise trend.
  • No opinions or egos: Do you have a big ego? Do you trade to impress people? Do you trade to be right? Egos, impressing people and trying to be right are the kiss of death when it comes to making money in the markets. All you want are results based on price action and trend following algorithms.
  • Value: Smart traders use our firm’s original research for new trading ideas and to confirm their research.
  • No favorite stocks, ETFs or Forex pairs: Why someone is focused on one particular market alone? They will say that they want to trade stocks only. Or they want to trade currencies only. Why do this? To say that you only want to trade certain markets immediately limits you to missing other markets that may be winning. Do you really care what market you make money in? If you make all of your money, hypothetically, shorting the euro, so what? If you make all of your money for a particular year being long Apple stock, so what? Don’t have favorites. Favorites are the sure sign of an inexperienced trader, a trader who has an expensive lesson to soon be learned. A system for every market is what you want.
  • Ease of Use: Manage your entire system taking only a few minutes per day. How do you use today’s trading action to determine strategy for the next day? That’s the key.

Bottom line: no balls, no babies.

I first saw Mark Cuban use that line. My assistant has never cared for it, as she thinks it is crude. However, as an old baseball catcher who did his fair share of cursing, that line says so much. It outlines a critical distinction between risk and return.

Our process for assembling trend following research and education is extensive. The background, the stories of how it all came together for our students, can be found here:

Read more about our thought process.

Read more about our trend following training. Keep in mind–TANSTAAFL–there ain’t no such thing as a free lunch. Our training is not a commodity.