Systematic Trend Following Is Not For Small Traders

One of the most common proposals in the world of futures trading is that in order to be successful, you need to follow a mechanical system and trade with strict discipline. Many proponents of this wisdom have pointed to the success of some of the biggest names of current and current trade advisers, such as John W. Henry, who now owns the Boston Red Sox. Over the last decade, several books on trend tracking systems have been written. Commercial system vendors are constantly developing new systems for general sale for hundreds or even thousands of dollars.

Unfortunately, the fact that small traders cannot afford to trade mechanical trend-following systems in the futures market. Why? The answer is simple … The disadvantages of trading mechanical systems are too great for small traders to deal emotionally and psychologically. Consider this fact … Bill Dunn of Dunn Capital Management has experienced at least seven 30% or more declines in his 40-year career as a product advisor with a systematic trend-following strategy. Two are 50%. .. During that period, combined annual revenue was about 18%.

While Dan Capital’s combined annual earnings are certainly impressive, most investors aren’t attracted to the shortcomings. A 50% drop is equivalent to a stock bought for $ 100 going down to $ 50. This kind of variability is actually similar to the performance of Apple stocks since 1990 and has similar returns, but since then the number of people who own Apple stocks has been the same. 1990? Most advocates of systematic trend tracking point out that losses are simply the cost of doing business. They compare systematic trend tracking with casinos, which are the major leaders in their customers. This is certainly true, but it is also clear that trends that follow trends can experience significant performance degradation over the long term compared to other assets. This is the case since 2009. With the exception of 2010, the last four years have been very difficult for most trend followers in the futures market. In fact, with the exception of 2008 and 2010, trend-following performance over the last decade has been fairly mediocre since 2004. Visit:-

For example, John W. Henry actually closed his business because of instability. He goes back to the past year. Decade. Some argue that it was because he entered the world of Major League Baseball. However, this slump is also reflected in the decline in assets held by the former Turtle R. Jerry Parker and his Chesapeake Capital Management. Chesapeake’s assets managed in the futures industry exceeded $ 1.5 billion in 2007 and are now just over $ 300 million. This is due to a performance record posted on

Regardless of these recent actions by many trend followers, supporters will suggest that it is time to start investing in such programs. This is probably true. A period of high performance often follows a poor performance of a follower, and this cycle should be continued. However, systematic trend tracking still has significant drawbacks and is not yet the answer for small investors and traders who want to trade their accounts.

Most advocates of systematic trend tracking introduce small traders to a small number of trading psychologists. They suggest that traders should learn to emotionally move away from his trading in order to succeed. In other words, they must learn to accept these 30% or more reductions simply as part of the wealth-building process.
I remember the similarities with the golf world. It’s not uncommon for a professional golfer to hire a sports psychologist who is struggling to hold a tour card or finds it difficult to function well on a competing Sunday afternoon. No golfer can think of a golfer who later became the dominant player. The best players are absolutely reluctant to lose and are not emotionally separated.

Consider this recent example. Phil Mickelson had just won the British Open after suffering a devastating defeat at the US Open just a month ago. He said he could barely get out of bed for two days after losing, but recovered and won the Scottish Open and the British Open over the weekend. Meanwhile, Lee Westwood, who has never won a major golf championship, missed another opportunity to win the British Open and later suggested that it was “just a game.” He has never won a major after 62 attempts. I think he will never beat the majors with this attitude.
Traders like golfers are always looking for the Holy Grail. What many traders want to find is a mechanical trading system that makes all the decisions and makes a profit every month for them. Golfers

Leave a Reply

Your email address will not be published. Required fields are marked *