Thursday, March 7, 2013

We do not lose money

From the Michael Covel's book on trend following one can come to conclusion that trend followers do not generate loses. They only experience some temporary drawdowns....

Sometimes some of these "drawdowns" can strangely turn into catastrophic blowouts that wipe out trend follower's fund. Shit happens even to the wizards of trend following, it seems...

But how it is possible that trend followers experience major drawdowns at all using tight stop-losses in the range of a couple of percentage points?
(my colleague suggested that these drawdowns are in fact results of numerous exists caused by stop-losses from incorrectly identified trends)

Still, at least the trend followers apparently have some plan and discipline many of the other monkeys are lacking.

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