How Where Last Month’s Trading Results?
Last week I had a marathon of meetings with investors, introducing brokers and FCMs. A common question came up, “How was last month? I had to chuckle because as much as Aug 2011 was a good trading month it means absolutely nothing. This question came up not just from individual investors but directors of managed futures at big brokerages. I gave them my proprietary numbers and most were very pleased. I probably am the worst salesman as I almost immediately told them that it means nothing. I will have good months…bad months and that most of my trades do not work. Looking at such a short period is the opposite of everything that I have learned about compounding money over time. I look at a 10 year period or even longer. Trend following is a marathon. You can have several good years…several flat years and then a great year. When you average them out it can come out to a 10-15% or great CAROR. You can also have long draw downs and steep declines. This is what trend following is. If one wants to succeed in trend following they need to look at a much longer time frame than most investments. They need to know it will be a rocky road. Mostly they need to know last months or last years returns for better or worse mean absolutely nothing. It is the compounding over long periods.
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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