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This chapter is from the book

Key Points

  • Seykota: “All profitable systems trade trends; the difference in price necessary to create the profit implies a trend.”
  • Trend following is based on simple universal laws we can all learn.

  • No one knows how high or how low a market will go. No one knows when a market will move. You can’t undo the past, and you can’t predict the future. Prices, not traders, predict the future.
  • Trend followers buy high and sell short low. This is counterintuitive for most.
  • Using “common sense” is not a good way to judge or trade markets.
  • Losses are a cost of doing business. No one can be right all the time. No one can make money all the time. Trend followers expect and handle losses with objectivity and detachment. If you don’t have losses, you are not taking risks. If you don’t risk, you won’t win.

  • Price goes either up, down, or sideways. No advances in technology, leaps of modern science, or radical shifts in perception will alter this fact.
  • What if they told you that the best way to get to point B, without bumping into walls, would be to bump into the walls and not worry about it? Don’t worry about getting to point B, but just enjoy bumping into the walls.43
  • “If you take emotion—would be, could be, should be—out of it, and look at what is, and quantify it,” says John W. Henry, reflecting from the owner’s box at Fenway Park, “I think you have a big advantage over most human beings.”
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