Edward Arthur Seykota (see Chapter 2) pioneered systems trading using early punch-card computers to test ideas. In his influential best seller, Market Wizards: Interviews with Top Traders, author Jack Schwager devotes a chapter to Seykota and writes that his “achievements must certainly rank him as one of the best traders of our time.”1
The stock market is never obvious. It is designed to fool most of the people, most of the time.
I know you look at trend following from not only a trading perspective, but a life perspective.
I think if you’re going to really be a trend follower you’re going to have a lot of trouble limiting it to one area. Because let’s say you have a trend following system. You say, “I’m going to have a diversified portfolio, a trend following portfolio. I’m going to free myself up from emotions. Emotions have always been a big problem here, so I’m going to have a diversified trend following portfolio or I’m going to invest in somebody else’s portfolio and that’s going to fix this emotional problem.”
Then what happens? Their investment or their portfolio goes up and down and they get emotional problems with that. You don’t really fix your emotions by having a system. What you do is you just move them up stream. You have constituents within the portfolio that used to bother you, and they went up or down, and then now you have a portfolio that goes up and down so you just move the problem upstream. Ultimately you ...