Trend Following Skepticism

Trend following causes some to waste years sitting on the sidelines.

They can’t take a step forward.

They can’t believe there is an alternative way to trade.

Stanford University psychologist Leon Festinger (PDF) once said:

“A man with a conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.”

That explains succinctly why so many refuse to adopt trend following thinking. Even though Michael Covel has laid out massive proof, many just look for the excuse. Even though he has written four books, made the only film on trend following and has the only trend following podcast, some just remain scared to start.

Sadly, skepticism for some is too deep-seated.

Why?

Consider one explanation:

“It would seem that expecting people to be convinced by the facts flies in the face of, you know, the facts. The theory of motivated reasoning builds on a key insight of modern neuroscience: Reasoning is actually suffused with emotion (or what researchers often call ‘affect’). Not only are the two inseparable, but our positive or negative feelings about people, things, and ideas arise much more rapidly than our conscious thoughts, in a matter of milliseconds—fast enough to detect with an EEG device, but long before we’re aware of it. That shouldn’t be surprising: Evolution required us to react very quickly to stimuli in our environment. It’s a ‘basic human survival skill,’ explains political scientist Arthur Lupia of the University of Michigan. We push threatening information away; we pull friendly information close. We apply fight-or-flight reflexes not only to predators, but to data itself. We apply fight-or-flight reflexes not only to predators, but to data itself. We’re not driven only by emotions, of course—we also reason, deliberate. But reasoning comes later, works slower—and even then, it doesn’t take place in an emotional vacuum. Rather, our quick-fire emotions can set us on a course of thinking that’s highly biased, especially on topics we care a great deal about. Consider a person who has heard about a scientific discovery that deeply challenges her belief in divine creation—a new hominid, say, that confirms our evolutionary origins. What happens next, explains political scientist Charles Taber of Stony Brook University, is a subconscious negative response to the new information—and that response, in turn, guides the type of memories and associations formed in the conscious mind. ‘They retrieve thoughts that are consistent with their previous beliefs,’ says Taber, ‘and that will lead them to build an argument and challenge what they’re hearing.’ In other words, when we think we’re reasoning, we may instead be rationalizing. Or to use an analogy offered by University of Virginia psychologist Jonathan Haidt: We may think we’re being scientists, but we’re actually being lawyers. Our ‘reasoning’ is a means to a predetermined end—winning our ‘case’ and is shot through with biases. They include ‘confirmation bias,’ in which we give greater heed to evidence and arguments that bolster our beliefs, and ‘disconfirmation bias,’ in which we expend disproportionate energy trying to debunk or refute views and arguments that we find uncongenial.”

Why will the majority never trade like a trend following trader?

That is one major reason.

Here is another example:

“Some people see the signs. Others do not. Some decide to get out while the getting is good. Others do not. Incident by incident, trigger point by trigger point, people see signs. Most people ignore them. ‘It can’t happen here.’ Most times it doesn’t. Sometimes it does.”

Exactly.

However, skepticism is important and often invigorating for many reasons:

  • You are on the right track when a target appears on your back.
  • Making a sizable dent in public thought brings detractors and saboteurs. It’s part of doing business.
  • Trying to get everyone to like you is mediocrity.
  • You are going to be criticized if you play small or play big. Might as well play big. Criticism will come either way.
  • History does not remember those who pretend to be neutral. Picking sides, choosing those you want to be associated with, and sticking with your true beliefs, is all that counts.
  • Speaking out on issues, that others are too afraid to speak against, will draw criticism.
  • Disgruntled people need to release anger. Standing there as an easy outlet for their anger is part of the gig. Criticism always parallels influence.
  • It takes courage to see things for what they are, not what you want them to be.
  • Poking an inferiority complex brings out vitriol–always.

Society’s insatiable push to discredit those who rock the boat, coupled with digital printing presses cataloging it all, has allowed village idiots and Nobel Prize winners to effectively share the same stage. In this environment, for many, the truth has ceased to matter.

Start here to attend your trend following re-education camp.

Trend Following
Trend Following