Great Trend Followers Reaction To Price

Trend followers and Mutual fund managers react to price in different ways. The price refers to a potential profit or loss for both the commodity trading advisor whose method is trend following and a mutual fund manager. If the price increases from the point of purchase both commodity trading advisors and mutual fund managers profit. The difference is how the two react to price decreases or losses. Losses can not be avoided. If you want to avoid a loss…don’t trade..If you are not having losses you are not taking any risks.
So as unavoidable risks are…the difference is big losses and small losses. It is an innate part of any commodity trading advisor who uses a mechanical trading system to detail where the trade does not work. They exit with a small loss and move on to the next idea.
How many mutual fund managers with fundamental trading methods average down when a stock goes down and think they are getting a bargain. The problem is cheap can get cheaper. One can easily point out the money that was lost on “great stocks” like Enron or Worldcom. How many mutual fund managers, university endowments, pension funds as well as private investors lost countless millions.
They had no plan…or strategy and worse off bought more thinking this was a great bargain. The same story can be said with the Singapore Sovereign wealth fund buying Citi or China buying into Blackstone. Countless millions were lost.
Now compare this to a commodity trading advisor who is aware of risk who is in a trade such as Crude oil. He has no opinion what so ever. The price of crude goes from it’s high..sells off..the commodity trading advisor looks to take a calculated trade. He knows exactly where the trade does not work…and if it does..he follows it.. ( Trend following).
Look at the crude chart as an example. Lower prices are not a better buy when you are long. They will cost you to lose money. Trend follow is exactly what is sounds like. Follow the trend…the key is all the small losses you will incur until you stumble upon a nice trend.
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