Lessons Learned
Readers have been asking what were some of the biggest lessons to emerge from the book research. A few that come to mind include:
1.) Short-term focus: There are many that simply do not understand the concept of risk or volatility. When they see a down month for trend followers these people think there must be a problem. The reality? Down months happen. They are expected. The more you risk, the more you make and the larger the drawdown. We still to this day see people not understanding the absolute return benefits over time.
2.) Richard Dennis’ students: Not all of his students were/are successful. In fact, some are failures by any measure. Interestingly, the reasons seem to go right back to a lack of discipline and or poor personal psychology, not the trading strategy itself.
3.) Long Term Capital Management: Trend followers were the winners to LTCM’s losing. The performance data almost looks like a direct wire transfer in the zero-sum game.
If this blog does it’s job over time it will be to further expand on the book’s topics and debates.
