Saturday, September 15, 2012

Trend following - on stocks???

This week I finally got round to start reading Jack Schwager's Stock Market Wizards, the third book in his series on successful traders. My dog-eared copy of the original Market Wizards helped shape me as a trader, after reading the interviews with Ed Seykota and Larry Hite, two prominent and famous trend followers. Even now I can recite those interviews almost word for word, and still have the CD version of those two interviews in my car.

As the book concentrated on people who trade equities, I thought it would be interesting to see how many of those interviewed solely referred to price action when determining when to enter and exit a position. Although I haven't read all the chapters in detail yet, the answer seems to be... none.

Sure, there are loads of traders who use moving averages for example to determine trends, but I was curious as to see if I could come across other traders who use a systematic trend following style on equities, but, having scoured the internet has also turned up very little.

It seems that even these days, the systematic breakout style used by the likes of Seykota, Hite, Richard Dennis and the Turtles and others is still used predominantly in the futures markets. Why is this? I have no idea. I sure would love to hear from other traders who use such systems on equities, as it seems to be a very uncommon (yet profitable) method of trading stocks.

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