Should you invest in trend following?
Admittedly I am biased and believe that trend following has to be one of the best strategies for investors in order to compound money over time. The reason I can say this I have learned how to think when I invest. There is no magic system nor magic manager. It is all following an exact plan with strong risk management and having realistic expectations.
I am on a marathon meeting potential investors and brokers and I am trying to look at trend following from another perspective.
Why would someone consider investing in a strategy that most trades do not work? About 60-65% of the trades lose money. So many investors think that a high winning percentage is the key to making money. This is wrong however. Why would someone want to invest their money in soybeans or natural gas? Why would someone consider selling short?
Aren’t we all suppose to do the same thing? Aren’t we suppose to only invest in bonds or the stock market and maybe a little bit of real estate?
Trend following is the anti thesis investment idea. You can go through long periods of draw downs and just plain aggravation if you let it.
Well the reality is that I have been trend following since 1994. I have learned to be different. I do not get upset when I have numerous trades in a row that do not work. I do not get excited when I stumble into a nice trade ( because I know that it can turn around even quicker). The key to successful trend following is have a plan…be disciplined…committed …patient and have a strong risk management plan in place. Trend following is not easy. As Bill Dunn( a trend following Billionaire) states that one rides a wild bronco when trend following. Bull market, bear market, inflation or deflation it does not matter. There is a potential for success. Can you say the same with the stock market, bond market or even real estate?
Ask yourself should you invest in a trend following strategy? Trend following is not for everyone. Trend following has to be hardest yet easiest thing ever to do.
Trading futures and options involves substantial risk of loss no matter who is managing your money and is not suitable for all investors. Past performance is not indicative of future results
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