Your work is great, Mike. Keep doing what you do, and how you do it. The fact that you keep one foot in obscurity, staying just under the radar – it’s like the old days of college radio. Mainstream is for sellouts.
Are all trend followers use spreadsheet alone to trade? Or they also use charts for visualization? I am having a hard time trading using spreadsheet alone and I tend to see a chart. It provides the visualization I need.
Thank you
Best Regards,
[Name]
What does the visualization do?
Are your trading decisions based on the price or visualization of a chart?
Was on my daily post-trading hike, enjoying your Valeant podcast. As usual this one also very well done! You know, as I was listening it reminded me of an article I read a number of years back about [Bill] Ackman. I couldn’t remember where I read it, or even all the details, but remembered the article discussed this bike ride Ackman took where he was so [!@#$] egotistical I was thinking at the time this guy is gonna blow up some day. He’s the type that just can’t admit he’s ever wrong, and we both know in trading one had to lose at times to win. And then I heard the Podcast. When I came back from the hike I googled Ackman bicycle ride and it came up immediately; was in Vanity Fair.
Keep up the good work!
Best,
[Name]
PS. Something else I wanted to tell you. After enjoying a Tom Basso podcast, [we connected]. Then a few months ago he posted something about the [location] in [location]. I emailed him and mentioned my [location] home is less than a mile from there. He emailed me back and we found out we’re within a mile of each other. Since then we’ve become friends, had dinner with [people] a few weeks ago. Thanks to you for hooking us up.
Very cool on Tom.
Tom coming on my podcast… really set a tone early on and throughout. Next time I am in the States I need to swing through [location].
In 1995, psychologist Daniel Goleman published his best-seller Emotional Intelligence, a powerful case for broadening the meaning of intelligence to include our emotions. Drawing on brain and behavioral research, Goleman demonstrated why people with high IQs often flounder, while people with modest IQs often do extremely well. The factors that influence how well we do in life include self-awareness, self-discipline, intuition, empathy, and an ability to enter the flow of life, character traits most traders would not consider particularly useful for garnering profits from the markets.
Being self-aware also means understanding what you want out of life. You know what your goals and values are and you are able to stick to them. For instance, if you’re offered a high-paying job that doesn’t square with your values or your long-term goals, you can turn it down promptly and without regret. If one of your employees breaches corporate ethics, you deal with it instead of either ignoring it or worse yet making a half-hearted response because you pretend to yourself it won’t happen again.
Emotional self-control makes anyone more productive. However, Goleman is not saying we should repress our feelings of anxiety, fear, anger, or sadness. We must acknowledge and understand our emotions for what they are. Like animals, biological impulses drive our emotions. There is no way to escape them, but we can learn to self-regulate our feelings and, in so doing, manage them. Self-regulation is the ongoing inner conversation that emotionally intelligent engage in to be free from being prisoners of their feelings. If we are able to engage in such a conversation, we still feel bad moods and emotional impulses just as everyone else does, but we can learn to control them and even to channel them in useful ways.
A trend follower’s ability to delay gratification, stifle impulsiveness, and shake off the market’s inevitable setbacks and upsets, makes him not only a successful trader, but also a leader. Goleman found that effective leaders all had a high degree of emotional intelligence along with the relevant IQ and technical skills. While other “threshold capabilities” were entry-level requirements for executive positions, emotional intelligence was the “sine qua non” of leadership. Without emotional intelligence, someone can have superior training, an incisive and analytical mind, and infinite creativity, but still won’t make a great leader.
Now consider recent feedback to me in email:
Psychology is not a science, an art, a philosophy nor a religion. Why would I want to waste my time with people whose subject is completely unworkable?.
Yours truly,
[Name], a satisfied Scientologist for 48 years.
I can understand that. If I was in a cult I would say the same.
Note: Take a listen to some of the best minds in the field of psychology here.
You must use trend following like technical analysis as a tool not a religion. I do believe quantitative easing is good because it drives the stock markets up and as a trader I make my money and pocket when the stocks are going up not with philosophy therefore I believe in Wall Street’s industry and the SEC and the Fed and US government whether good or bad ethically as they are a fact all those so called gurus predict or praise one thing and make money as counterparts as trading is binary buyer or seller by taking the opposite direction/position example Bill Bonner predicted in Money Week mag a few years ago that QE would lead to financial disaster leading to hyperinflation but there is no unemployment right now in the us 5 % there is a growth 3 % / year the highest standards of living in the world big house / cars etc. it is an affluent society but for a tiny minority of lazy couch potato people of course you get my point the truth is none can predict the future and if directors from the fed with a background of PhD in economics from Harvard the most brilliant people cannot they have the best reports from administrations then gurus cant either.
I believe as a taxpayer QE is fair because it drives my stocks up on the market and i want my money back because unemployed workers do not pay taxes and even if QE does not create enough jobs in the real world economy who cares
The worker should learn how to play the game and risk his money on the stock exchange instead of watching football games on TV all day
No pain no gain.
There will always be losers and winners and it is a matter of choice
My feedback:
1. Trend following is a tool. You have some misunderstandings you can correct if you are curious.
2. There are some points in your rant I think might make sense, but other parts are incoherent.
“Listened to your interview with Bill Bonner. Your comments on economists made me think of this old joke. Click on image and move mouse: here.”
Summed up nicely:
“The fed’s try and stretch the addiction out as long as possible. Why? Because running a rehab clinic can be a good business, especially if the patients never recover. Patients are never allowed to hit bottom. They never get better, and the quacks bring more and more wealth and power to themselves and their friends.” – Bill Bonner
Trend Followers don’t shy away from losses. Losses provide valuable feedback that helps them improve as traders. Sometimes, losses occur despite solid strategies and perfect execution.
Such is life when participating in markets. Some trend followers break down, change their approach and pursue a career of trying to find consistent gains day after day, month after month, year after year.
Every so often, all traders experience a painful losing period that can last a while. Trend Followers, after conducting endless hours of research, know that their strategy will experience losses from time to time. They accept this from the very beginning before they even make a trade with real money.
In general, investors take losses personally and purposely try to avoid them. They have positive intentions though. They want to protect themselves from the feelings that come up during losses; that sinking feeling in their stomach; headaches; cold sweats that comes with anxiety.
Fundamentalists avoid losses; instead, preferring to be right and feel smart. As a result, they sometimes ignore the reality and hold onto losing positions – sometimes long enough to put themselves out of business. Here’s an all too common exchange between two very different types of investors – Fundamentalists and Trend Followers.
Fundamentalist: “XYZ has to rise. The fundamentals are strong – earnings growth is positive; valuation is reasonable; it’s positioned well in a vibrant industry.”
Trend Follower: “Hmm…well, despite your optimism, I notice the stock price moving downwards.”
Fundamentalist: “Yea, but this is a temporary dip. It has to go back up at some point. The fundamentals are too good for it to stay down.”
Trend Follower: “Maybe, but what if it keeps going down? What if it’s strong fundamentals aren’t enough to make it move higher? What if the broader market fundamentals and sentiment drag it down? Your analysis won’t mean sh*t then.”
Fundamentalist: “You’re a simpleton technical trader. You care only about the price now. You do not and cannot see the stock’s future potential like me. I know this company inside and out. Based on it’s fundamentals, this stock will be a homerun one day. Any dip in price should be viewed as a buying opportunity.”
Trend Follower: “I don’t need to know the fundamentals if I know the price. Nothing else matters besides the price. If I buy a stock that appreciates in price, I make money regardless of what the fundamental story is. Plus, earnings reports can be easily manipulated. The stock price is real; it cannot be faked; it’s the only thing that can be trusted.”
Fundamentalist: “Whatever, trend boy.”
Back to avoiding losses – in all likelihood, investors avoid losses because they don’t want to accept them as part of the deal. They simply want to win all the time. Those who do the work, and who don’t live in fantasy land, know that this is impossible to achieve, so they prepare for losses by budgeting for them.
As a result, these investors, humbled by the facts that research taught them, learn that budgeting for losses can help improve overall returns better than trying to avoid losses altogether.
Trend Followers accept losses as part of the process – a tax, if you will, on the path of achieving long-term success. Before placing a trade, trend followers assess the market, its behavior and their financial condition (what positions they currently hold; risk exposure in each position, sector and portfolio overall; their capital base).
Trend Followers take risks within their budget, so if a particular trade does not work out, they lose an amount within our budget. When you take risks within your budget, you survive; you survive through the dips with enough capital to take advantage of the big opportunities when they come along.
Make losses affordable and learn to live with them, especially you win-at-all-costs alpha males out there. Take small ones more frequently, so you can avoid big ones less frequently.
Michael G. Melissinos
Melissinos Trading, LLC
www.melissinostrading.com
Note: You can also find an appearance by Michael on my podcast.
