January 7, 2013 Leave a comment
First of all our best wishes for 2013! We hope that you and your family may enjoy a fantastic health and have lots of wonderful and warm moments together! On a financial level we hope that 2013 will give us an exceptional rally (doesn’t matter which direction; whenever it moves and foremost: moves long ENOUGH it is OK). We must admit: those last two years were not that easy for longer term trend followers. Lots of trends started, continued for one day, and immediately fell back into their ranges or broke down. Going short generated most of the times the same problems: lack of follow through, markets rallied back and stopped us out frequently. Where the 90s were still in some kind of an “invincible up-mode”, the markets in the new millennium can be described as a volatile, go-nowhere zone (especially in the last two years).
Lots of big and famous fund managers (you know, those that were interviewed in Schwager’s book Market Wizards) didn’t manage to stay out of the red colors. This seems to be very illustrative for the period in which we are for almost two years now. While having excellent track records for decades, last two years were absolutely horrible in terms of performance. Take a look at the latest results (November) from automated trading systems:
But trend following has been declared “morte” several times so we don’t care about that. Trading is all about staying with your system, staying disciplined and prepared. You don’t have to panic if you are a longer term trader. Those periods happen and there is not much we can do about that. It isn’t necessary to change your whole system. What’s best is to adjust position sizing and start scaling in if you see more and more suitable candidates. Don’t be hasty!