- The Market
- Winning and Losing
- Investor v. Trader: How Do You See the World?
- Fundamental v. Technical: What Kind of Trader Are You?
- Discretionary v. Mechanical: How Do You Decide?
- Has Trend Following Changed?
- Trend Following Modus Operandi: Follow Price
- Follow the Trend
- Handling Losses
- Key Points
A wise trend follower once told me a story about when he was in Bermuda, with a new trader who wanted to learn the "secrets." "Just give me the quick and dirty version," the neophyte said. The experienced trader took the newbie out to the beach. They stood there watching the waves break against the shoreline. The neophyte asked, "What's your point?" The old trader said, "Go down to the shoreline where the waves break. Now begin to time them. Run out with the waves as they recede and run in as the waves come in. Can you see how you could get into rhythm with the waves? You follow the waves out and you follow them in. You just follow their lead.
In our search for the facts about Trend Following, we learned that its basic tenets, its philosophical underpinnings, are relevant not only to trading, but also to our lives in general, from business to personal relationships. We also found in our conversations with the old pro trend followers that Trend Following works best when pursued with an unbridled passion.
How important is passion? Brett Steenbarger, Ph.D., an Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY, puts it in perspective:
"Find your passion: the work that stimulates, fascinates, and endlessly challenges you. Identify what you find meaningful and rewarding, and pour yourself into it. If your passion happens to be the markets, you will find the fortitude to outlast your learning curve and to develop the mastery needed to become a professional. If your passion is not the markets, then invest your funds with someone who possesses an objective track record and whose investment aims match your own. Then go forth and pour yourself into those facets of life that will keep you springing out of bed each morning, eager to face each day."38
Many people would sooner die than think; in fact, they do so.
As we assembled Trend Following, we found that when used within the context of passion, the term "Trend Following" could also be substituted throughout for other activities in life. Our insight occurred when rereading this passage from a 1938 book on creative writing by Brenda Ueland:
"Whenever I say writing in this book I also mean anything that you love and want to do or to make. It may be a six act tragedy in blank verse, it may be dressmaking or acrobatics, or inventing a new system of double entry accounting . . . but you must be sure that your imagination and love are behind it, that you are not working just from grim resolution, i.e., to impress people."39
Among people who take the trouble to understand what the business is about instead of assuming it involves speculating on live cattle, it is readily understood.
Bruce Cleland, Campbell and Co.40
If you take emotionwould be, could be, should beout of it, and look at what is, and quantify it, I think you have a big advantage over most human beings.
John W. Henry41
Trend followers do not trade with grim resolve or with an intention to impress others. They are playing the game to win and enjoying every moment of it. Like other high level performers, such as professional athletes and musicians, they understand how critical it is to maintain a winning attitude if you want success.