Choppy Non Directional Markets While Trend Following

Welcome to the reality of trend following. I had an email from an aspiring money manager this morning ( He will probably read this post as well). It was interesting for me to read his email.

Quoting him “I enjoy checking in on your blog posts. These choppy markets make me want to jump out a window! Any takers on your mentor program?

The reality is when we trend follow these choppy markets are to be expected. No one ever promised us year over year profitable returns. My goal is not to have surprises. I anticipate these choppy periods and know that nothing has to happen. This is why I speak about patience all the time. We must stay in the marathon and not give up. In my opinion as I know I will go through these non directional ugly periods I under trade. I do not risk more than 1% of my account size on any position. More so I assume most of my trades will not work. This is OK as I know that I will make money at one point however I never know in which market or when.

What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals. There is a draw down out there that will make one stop trading, this is why I attempt to play the defense. As trend following is my passion and lifetime strategy to invest, I do not want to imperil it.

This last Summer in particular there was a manager who had a great track record with 30% CAR however he was a counter trend trader. He blew up on the Swiss Franc this Summer. The Swiss kept on rising and he kept on fighting it until he was down 80%.

I will soon be teaching a course on trend following. My goal is present the realities of trend following. It is not sugar coated or get rich quick nonsense. The basis is when we go through periods like this, you will not be surprised ( or should not be). It will be almost expected. I will try to teach you how to mentally get through these periods as well as not become euphoric or reckless when you go through periods in which you make money.

The hardest part of trend following is us. It is not the trading system or algorithms. We either succeed or fail due to our fears and greed or lack of following the trading plan.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (”FOREX”) IS SUBSTANTIAL.