I caught some comments today that provide useful instruction - for all the wrong ways to think about trend following. While the author may indeed be intelligent, when it comes to trend following, he has no clue. His first comment:
Before you can follow a trend, you must be able to determine that a trend exists and that it is actually in progress at the present moment. Is it possible to make this determination with any certainty?
Actually you can’t know that a trend exists upon entry. You can’t know a trend until it is over. More from the same writer:
Let’s say you look back and see that a trend has occurred in the past. How can you determine the causal factors that brought about the trend in the first place? If you could determine the factors that precipitated the trend, how can you be assured that the same factors occurring in the future in a different market would generate the same buying and selling responses that created the prior trend?
What do the factors that cause a trend have to do with making money as a technical trend follower? Trend followers do not concern themselves with the factors that cause trends. More from the same writer:
My take is that seeking trends in the market and talking about trend following is a form of a faith-based activity.
Let me get this straight: The $10 billion or so invested with Winton Capital was done because those investors believe Winton is practicing some form of unscientific religion? I can’t figure out if these comments are truly ignorance or some form of misinformation. Either way I remain energized to get as many investors as possible to at least become aware of trend following. Once most investors have actually heard of trend following my job will be complete, but I clearly have a long way to go.
