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In a message dated 2/12/02 12:51:46 PM Eastern Standard Time, ringram@xxxxxxxxxxxxx writes:
But it is amazing how the majority of traders who regularly make 50% p.a. or more seem to come from other than the trend-following group.
1. Just out of curiosity, could you name all of the "OTHER THAN TREND-FOLLOWING" methods that you know of AND name the famous Traders who use them?
Those which have as you say DON'T have a (as in "not any") trend following component?
"This is because it has a trend-following component and I feel my profits lay elsewhere - one day I will try them just for completeness."
2. Could you please, with some "proof", verify this statement: "But it is amazing how the majority of traders who regularly make 50% p.a. or more seem to come from other than the trend-following group."
The "PROOF" I offer that you are incorrect is this:
John W. Henry (Trend-Follower)
"If one theme summarizes Henry’s philosophy, it is the knowledge that one cannot predict anything. Henry is a long-term follower. His philosophy is based on the premise that market prices, rather than market fundamentals, are the key aggregation of information needed to make investment decisions. He says, "The markets are people’s expectations," and these expectations manifest themselves as price trends. "We live in an uncertain world. One cannot predict the future of anything. In an uncertain world, identifying and following trends may be the only reasonable investment approach over the long term. Henry feels that a mechanical approach has more value since no scientific approach or solid testing can be applied to discretionary trading. Henry says that when he first researched the markets in the 1970s, he was looking for a methodology that would work through many market conditions. His research showed that long-term approaches work best over decades. "There is an overwhelming desire to act in the face of adverse market moves. Usually it is termed ‘avoiding volatility’ with the assumption that volatility is bad. However, I found avoiding volatility really inhibits the ability to stay with the long-term trend. The desire to have close stops to preserve open trade equity has tremendous costs over decades. Long-term systems do not avoid volatility, they patiently sit through it. This reduces the occurrence of being forced out of a position that is in the middle of a long-term major move."
"...when I was designing what turned out to be a trend following system...[that] approach – a mechanical and mathematical system - has not really changed at all. Yet the system continues to be successful today, even though there has been virtually no change to it over the last 18 years." -John Henry
Bill Dunn (Trend-Follower)
Dunn Capital [Bill Dunn] is a long term reversal trend follower that exploited the Japanese Yen to extreme levels in 1995. They made money going up that huge mountain in February of 1995 and made money going down that huge mountain in August of 1995.Look at the monthly returns and look at the chart of the Yen. Do you see the correlation between gains/losses and ups/downs in the chart pattern? Dunn initiated the position in 1/95 and rode it until the top. He reversed the position on the downside of the first peak. The reversal was short lived as you can see by the spike back upward. Then there is the rather protracted steep downside reversal followed by Dunn.Dunn initiated a short position in the Yen after the first peak and did not get out of the position even when it when badly against him. He stayed in the position with mounting losses. However, the losses never approached his entry position on the short side. Consequently he sat there with great discipline and waited. The 4/95-6/95 flat/loss period in his returns corresponds directly to the same flat period in the chart.The huge downside move rewarded his patience. This example was not seat of the pants trading though. There were precise rules. His system is 100% mechanical. And by and large Dunn's past returns are highly correlated to other trend followers including Turtles.
Ed Seykota (Trend-Follower)
Ed Seykota is a self-taught trader who continually studies both himself and other traders. Trading as a trend follower, he turned $5,000 into $15,000,000 over 12 years in his model account - an actual client account. Ed was influenced early on in his career by Richard Donchian's writings. He has also served as a teacher and mentor to some great traders including Michael Marcus and David Druz.
Michael Marcus (Trend-Follower)
Marcus has been one of the most successful traders. Over a ten-year period, he multiplied his company account by an incredible 2,500-fold!Q. Did you know what you were doing wrong then?
A. Good question. Basically, I had no real grasp of trading principles; I was doing everything wrong. Then in October 1971, while at my broker's office, I met one of the people to whom I attribute my success.Q. Who is that?
A. Ed Seykota. He is a genius and a great trader who has been phenomenally successful. When I first met Ed he had recently graduated from MIT and had developed one of the first computer programs for testing and trading technical systems. I still don't know how Ed amassed so much knowledge about trading at such an early age. Ed told me, "I think you ought to work here. We are starting a research group and you can trade your own account." It sounded great; the only problem was that the firm's research director refused to hire me.
David Druz (Trend-Follower)
Tactical Investment Management
Dr David Druz has been hooked on the futures markets since the moment he saw a fellow medical student turn $2000 into $500,000 in the great bean move of 1970. For the next 20 years Druz pursued a dual career, studying medicine in term time and carrying out research work for a brokerage company during vacations, and then, in 1981, setting up his first futures fund while practicing as an emergency doctor in Fairbanks, Alaska. Two years ago Druz retired from medicine and moved from Alaska to the Hawaiian island of Oahu, in order to devote more time to his twin passions of windsurfing and futures trading. The goal of his company, Tactical Investment Management (TIM), is, he says: "To be good not big". "We optimise for robustness," says Druz, "because we want to be around for ever.
Q. You've worked with legendary trader Ed Seykota [of Market Wizards fame]. What was it like trading alongside a "master"?
A. It was one of the most incredible experiences of my life. He is the smartest trader I have ever seen. I don't think anybody comes close. He has the greatest insights into how markets work and how people operate. It's almost scary being in his presence. I worked with him as an apprentice for about five or six months in 1991/92. It was tough surviving working with him because of the mental gymnastics involved. If you have a personality weakness, he finds it - fast. But it's a positive thing because successful traders must understand themselves and their psychological weaknesses.
Richard Dennis (Trend-Follower)
Richard Dennis should be saluted for his skills as a trader and teacher. His instruction given to the Turtles was one of the great financial stories of all time. The Turtles' success as trend followers is unquestioned. The Turtle method and philosophy have stood the test of time. Trend following Turtles will mint money as long as there are markets to be traded.Dennis himself has made hundreds of millions of dollars over the years. But, he has also been unpredictable compared to his students. While his students have had successful money management careers by sticking with the Turtle system, Dennis seems to deviate from his own system every few years.
Donchian and his Students (Trend-Followers)
Richard Donchian, though now deceased, left many students that still trade or run money management firms. A sampling of his students include:Nelson Chang
Worked for Donchian
Started Chang-Crowell Corp. Robert Crowell
Worked for Donchian
Started Chang-Crowell Corp. Barbara Dixon
Worked for Donchian
Started Spackenkill Trading Bruce Terry
Worked for Chang-Crowell Corp.
Worked for Weston Albert Hallac
Worked for Weston
Worked for Victor Niederhoffer
What's the point? Trading as a trend follower is a learned behavior. Not everyone is going to trade this way. Most people want no more complexity in their life than to buy and hold. Most people don't want to think or learn about new methods. It takes discipline.
I look forward to your "PROOF" which proves your statments.
-David Carrington
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