Niederhoffer thinks "follow the trend" sucks

[tommo]

I'm a little hesitant to add to this thread as it seems to be getting hot blooded. But in my experience, which amounts to 10 years being a "local" (self backed prop trader) having worked with probably over 50 traders that regularly make over $1 million a year and countless other long term profitable traders the vast majority of them were counter trend traders. At least in short term trading.

I remember 7 or 8 years ago I read Covel's Trend Following book and loved it. Make total sense to me. Built some algo's and traded them for a year and had my worst year trading (fortunately i had my intraday stuff in the background that kept me afloat). I was disciplined, had tight risk, always went with the trend but the strings of little losers added up to bigger than any big loss i took counter trend trading.

I then switched back to counter trend strategies and has been all good for years since.

This is not a scientific evaluation, just market experience. I am open to anything, you have to be as a trader.

But one thing I would say is is THE BIGGEST MYTH ABOUT COUNTER TREND TRADING is that eventually you have to blow up when there is a sustained trend. Absolute nonsense. Being over leveraged with no risk plan causes you to blow up. I have been caught in one way markets, if it happens i hit my stop, i get out and come back the next day. On average my down days are bigger than my updays, but I probably have 3 times as many up days as down days. And thats over a long period. It works for me.

 

[Mo06]

Very interesting post Tommo.

 

[Frederick Foresight]

...But one thing I would say is is THE BIGGEST MYTH ABOUT COUNTER TREND TRADING is that eventually you have to blow up when there is a sustained trend. Absolute nonsense. Being over leveraged with no risk plan causes you to blow up. I have been caught in one way markets, if it happens i hit my stop, i get out and come back the next day. On average my down days are bigger than my updays, but I probably have 3 times as many up days as down days. And thats over a long period. It works for me.

...I think if we had to narrow it down, it would probably be in the area of loss cutting and money management. If VN went against a trend, we could surmise that he was anticipating a reversal of that trend and got his timing wrong. Or, perhaps he viewed the trend that was going against him as a temporary countertrend to the one he was trading. Or any other such reasonable explanation. And with proper stop and money management, he could have made a number of such ill-timed or ill-directed trades and still have enough capital to recalibrate once he saw the writing on the wall. But allowing one or a few trades to succumb into drama territory can lead to anyone's undoing.

 

[marketsurfer]

regardless of anecdotal evidence, outlier giant fund promoted performance, or Niederhoffer's foibles-- the fact is trend trading is an inferior trading tactic.

In fact, its more of a marketing idea that was turned into a flawed trading method. Just like scientology started as a joke/scam then became some peoples reality-- the same thing with trend trading.

Trend following promotors ---the L Ron Hubbard of trading.

surf

 

[syswizard]

regardless of anecdotal evidence, outlier giant fund promoted performance, or Niederhoffer's foibles--
the fact is trend trading is an inferior trading tactic.
surf

Surf - while this is true, no one has stepped up to say WHY this is true.
What specifically causes trend trading to get the bad word ?

 

[Frederick Foresight]

regardless of anecdotal evidence, outlier giant fund promoted performance, or Niederhoffer's foibles-- the fact is trend trading is an inferior trading tactic.

In fact, its more of a marketing idea that was turned into a flawed trading method. Just like scientology started as a joke/scam then became some peoples reality-- the same thing with trend trading.

C%vel ---the L Ron Hubbard of trading.

surf

Your endorsement of Michael Covel's book, Trend Following:

"This is an excellent book that I highly recommend…No, there are no secrets in it, but it’s extremely well written and contains many nuggets of knowledge from a multitude of top traders. I enjoyed it more than the Market Wizard books. It earned a spot in my 10 all-time favorite trading books." Dave Goodboy

http://www.trendfollowing.com/michael-covel-endorsements/

Although I agree with the basic premise, I found Covel's book, Trend Following, a bit too evangelical for my taste. So my praise would not have been quite so unequivocal as yours.

 

[monoid]

Your endorsement of Michael Covel's book, Trend Following:

"This is an excellent book that I highly recommend…No, there are no secrets in it, but it’s extremely well written and contains many nuggets of knowledge from a multitude of top traders. I enjoyed it more than the Market Wizard books. It earned a spot in my 10 all-time favorite trading books." Dave Goodboy

http://www.trendfollowing.com/michael-covel-endorsements/

Although I agree with the basic premise, I found Covel's book, Trend Following, a bit too evangelical for my taste. So my praise would not have been quite so unequivocal as yours.

Brilliant @Frederick Foresight!! Would be interesting to see how surf comes back on this one..... it is just comical!

 

[marketsurfer]

Your endorsement of Michael Covel's book, Trend Following:

"This is an excellent book that I highly recommend…No, there are no secrets in it, but it’s extremely well written and contains many nuggets of knowledge from a multitude of top traders. I enjoyed it more than the Market Wizard books. It earned a spot in my 10 all-time favorite trading books." Dave Goodboy

http://www.trendfollowing.com/michael-covel-endorsements/

Although I agree with the basic premise, I found Covel's book, Trend Following, a bit too evangelical for my taste. So my praise would not have been quite so unequivocal as yours.

Yes, it is well written and i enjoyed it very much. Just like i enjoyed the Zurich Axioms.

In fact, if you read carefully, you will see that I am name checked in the book, right next to famous trend followers.

It is one of my favorite trading books, but not for the reason you think, as its premise is fatally flawed.

Thanks for the PR. Follow on twitter @marketsurfer

surf

 

[syswizard]

If you get in on the trend early, it's great. If you wait too long, you can get really hosed.
For example, look at the "trend" in the Shanghai index. Those who were long 6 months ago, still doing great. Those long from 1 month ago.....totally devasated.

 

[monoid]

Yes, it is well written and i enjoyed it very much. Just like i enjoyed the Zurich Axioms.

In fact, if you read carefully, you will see that I am name checked in the book, right next to famous trend followers.

It is one of my favorite trading books, but not for the reason you think, as its premise is fatally flawed.

Thanks for the PR. Follow on twitter @marketsurfer

surf

.... and the surf comes back! He says:

The premise of the book is fatally flawed. Yet, he "highly recommends" the book (to others, of course). Hmmmmm.

Now, why would one do that? Thoughts surf?

Enjoying this comedy; don't want it to stop!