Podcast #4 and feed are live.

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Feedback in:

Mike, I really appreciate the work you put into that movie. What I really appreciate more than anything you have ever accomplished is your ability to think outside the box and search for what is real. You are a warrior. You stand on your own two feet. You don’t give up easily. Thank you for inspiring me. Have a good weekend.

Thanks Mark!

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I tell people all the time, “Don’t trust me, verify me.”

Source: behaviorgap.com.

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Paul Mulvaney is a trend trader profiled in my book The Little Book of Trading. His insight:

Mulvaney’s trend trading is profitable on 54 to 55 percent of days, but on only 25 percent of trades. Obviously those 25 percent of trades are more profitable than the 75 percent of trades that are losers. Many traders have a hard time accepting the numbers. If they only dig a little deeper they can see the profit margin.

More.

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If there was a Hall of Fame for trend followers the owner of the Boston Red Sox would be in it. A piece of timeless wisdom from John W. Henry:

How are we able to make money by following trends year in and year out? I think it’s because markets react to news, but ultimately major change takes place over time. Trends develop because there’s an accumulating consensus on future prices, consequently there’s an evolution to the “believed true price value” over time. Because investors are human and they make mistakes, they’re never 100 percent sure of their vision and whether or not their view is correct. So price adjustments take time as they fluctuate and a new consensus is formed in the face of changing market conditions and new facts. For some changes, this consensus is easy to reach, but there are other events that take time to formulate a market view. It’s those events that take time that form the basis of our profits.

Smart.

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In case you’re concerned that I will create a whole new generation of trend followers who will negatively affect the frequency, direction, and intensity of trends (as well as your ability to make money trading trends), forget it. Here are reasons why systematic trend following will continue to excel:

• Trend followers follow. They don’t generate trends. At the beginning or end of a major trend, there may be volatility, but it will be an extremely superficial, temporary effect.

• People play zero-sum games for many reasons. Not all play to win. Hedgers, for example, trade the market for certain reasons. It’s portfolio protection for them. Their insurance premium goes to trend following speculators. The hedgers are getting a benefit even when they lose.

• People would no longer buy and hold. Those believing in fundamental analysis (the vast majority of market participants) would have to switch how they trade.

• Most do not sell short. They now trade long only. That changes when?

• People would have to dump mutual funds. That will be hard with retirement programs literally mandating 100 percent investments in mutual funds.

• Most traders don’t think about how much to buy or how much to sell. They only worry about when to buy and rarely think about when to sell. That thought process is very hard to break for a mass trend following conversion.

• CNBC, WSJ, Bloomberg, etc. would need to stop broadcasting.

• Investors would have to disengage their emotions and egos from their trading. However, as long as there are human beings involved in the trading process, there will be excessive reactions and trends to exploit.

• People would need to stop gambling. I guess they might stop eating too.

Frequently the question is asked, “If trend following works so well, why aren’t more people doing it?” Acknowledging complete ignorance about the future is tough to accept, admit, and act on, but that is what trend following requires you to do.

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If you have not yet read the origins of Trend Following, dig in (PDF).

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The right attitude for trading success? Mission critical:

Fear is the dream killer, the silent voice that pushes us to lose our passion in a vain attempt to seek safety.

True that.

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Podcast #3 and feed are live.

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Podcast #2 and feed are live.

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Some reading that paints tougher times:

Warning: Goat Rodeo
Weaning Off ‘Alternative’ Investments
Japanese Population To Shrink By One Third, Size Of Workforce To Plunge In Under 50 Years
A Housing Bottom? What Are They Thinking?
The Slowest Non-Recessionary Growth Since 1947

I am not betting off their wisdom (it’s not needed to be a trend follower), but it is interesting to note smart people trying to figure it all out.

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Below is one life path–attached to the nipple:

A better option? Be a linchpin.

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