Tuesday, April 03, 2012

Quotes from Market Wizards

Here's a small collection of quotes from the Market Wizards interviews, that relate to trend following, or the beliefs that trend followers have. These may provide food for thought for those who do not believe in following trends. The people quoted here are amongst the most successful traders of their time, so anything they say should be listened to. I have purposefully avoided quoting two famed trend followers who have been interviewed in the book, namely Ed Seykota and Larry Hite, as I have referred to them extensively in previous posts on here.

Paul Tudor Jones:

"We have tested every system under the sun and, amazingly, we have found one that actually works very well. It is a very good system...(under the realm of) trend following. The basic premise of the system is that markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try and fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion."

"The most important rule of trading is to play great defense, not great offense."

"I don't really care about the mistakes I made three seconds ago in the market. What I care about is what I am going to do from the next moment on. I try to avoid any emotional attachment to a market."

" I always believe that prices move first and fundamentals come second."

Gary Bielfeldt:

"The best thing that anyone can do when starting out is to learn how a trend system works. Trading a trend system for a while will teach a new trader the principle of letting profits run and cutting losses short. If you can just learn discipline by using a trend-following system, even temporarily, it will increase your odds of being successful as a trader."

Richard Dennis:

"You should expect the unexpected in this business; expect the extreme. Don't think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I've been in this business, it is that the unexpected and the impossible happen every now and then."

"A good trend following system will keep you in the market until there is evidence that the trend has changed."

"The correct approach is to say: 'This structure is up, and this structure means no more, but never that this structure means up this much and no more'."

"I could trade without knowing the name of the market."

"The market being in a trend is the main thing that eventually gets us in a trade. That is a pretty simple idea. Being consistent and making sure you do that all the time is probably more important than the particular characteristics you use to define the trend. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend."

All of the aspects referred to directly or indirectly above form the cornerstone of both a trend follower's thought processes, as well as the nuts and bolts of their trading system. As a result, they are all covered in my own system, the rules of which are described in my e-book,or are fully covered in my training sessions with other traders.

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