Stories from an Old Time Trend Follower- Waiting for the Big One Winning Trade
Anyone who has been trading & trend following managed futures over the last 3 years knows how hard it has been. Actually this is one of the most hardest & unique periods in which almost 3 years in a row have been negative to losing. There are always draw downs and long periods of sub performance…however this period stands out and shows how tough trend following can be. Many commodity trading advisors are experiencing their worst draw downs EVER. Harder for clients to stomach is the duration of the draw down. It is never easy…but this period is exceptional. Many commodity trading advisors have even closed.
However, I was encouraged by an old timer. As much as Past performance is not indicative of future performance, he told me about traders that were discouraged in 1958,1959 and 1960. It seemed very similar to now. Long periods of losing and a long duration of time of flat to negative performance. Many traders and trend followers threw in the towel. However a small group of traders who were disciplined and patient were rewarded. In the soybean market of 1960 to 1961 in only 60 days the market became the proverbial ” Big One”. One trader turned $10,000 into $1,700,000…another $15,000 into $150,000 and yet another $60,000 into $280,000. These were rare and unique traders not representative of all traders as well as a rare period in the market. There is no precedent if it will happen again as all we are dealing in is complete uncertainty.
Again what he stated that most of the time, traders “try” to keep loses small and there are more periods like this than good periods. He stressed that one big move makes it possible for a trader to have 9 losing trades and one big one for them to come out positive…but it is a tough and emotional game.
When there will be the proverbial Big One…No one knows if or even when or what market. The Big one may or may not occur this year or next, this is what makes managed futures & trend following such a tough game. The best you can try to do is cut your losses, be disciplined, be patient and be prepared to stumble into trades. No one knows the future.
Past performance is not indicative of future performance