Can You Ride the Trend Following Wild Bronco?
Lets face it, trend following and commodity trading are not the easiest things for anyone to do. So many investors loved the idea that Bernie Madoff offered with consistent 1% monthly returns and no risk. We all know what happened to their no risk. Trading commodities has all kinds of risks and past returns of systems & commodity trading advisors are not guarantees of future returns. Contrary to this statement one can look at some of the various commodity trading advisors databases you see commodity trading advisors who have been around for decades and on average have returned close to 15% compounded. Taking $100,000 over 15 years at 15% grows to $800,000. One can use a larger number like $1,000,000 dollars and it grows to $8,000,000. Not bad…but you have to be able to accept the risks….and there are risks.
Michael Covel’s Trend following book has the cover of a bronco rider as the cover. This is so appropriate. More so Bill Dunn from Dunn capital has stated you need to be able to ride the wild bronco in his many quotes. I do not think I can ride a wild bronco but I have been trend following for 17 years and realized years ago that I can compound my way to wealth. I have done this by allocating to commodity trading advisors as well as having a robust trading methodologies based on trend following with strict rules on risk. I have told this over and over again during speaking engagements that if I can do this you can also.
However and a big however…it is not easy..it is not retirement in a box. You will go through ugly draw downs… you will have long periods in which you do not make any profits. If you can handle this emotional roller coaster or wild bronco you stand the ” possibility of compounding money”. There are no guarantees when we are trading. We are dealing in risk. Anything can happen and anything will happen. You need to realize this is risk capital. I have accepted the risk and consider myself extremely risk averse. In my trading models I focus on risk. Risk per trade…Risk per sector..and total open trade risk daily. Even with this I do not delude myself in thinking that I will not experience ugly draw downs or extended draw downs. These are expected and have happened repeatedly. The profits that can be generated are the potential rewards.
I personally believe this is the best way to compound money and put my money where my mouth is. Where else can you find a strategy that is liquid and transparent?
Futures trading involves risk. People can and do lose money