Most traders seek comfort in high win rates and/or as smooth an equity curve as possible. Yet long-standing trend followers have been able to successfully deal with the up and downs and the general vagaries of the financial markets. How that this been possible?
Simple, by making their strategies as robust as they can. Because they are not tailored towards a particular market state, they are able to control their losses when dealing with the volatility and lack of trending phases thrown at them.
"We have a saying here: "It is incredible how rich you can get by not being perfect." We are not looking for the optimum method; we are looking for the hardiest method. Anyone can sit down and devise a perfect system for the past." - Larry Hite, from his Market Wizards interview.
Think of it this way:
The markets are the terrain you need to travel over. You don't know what you will encounter - from billiard-table smooth roads, to rugged mountain passes, to dust trails, to sand dunes. You need to be able to drive over all these types of surfaces if you are going to navigate your way through to success.
So, to do this, you have the choice of two vehicles - which one would you choose?
Here we have a classic Lamborghini Countach - the car that appeared on many wall posters in the 1970's and 80's. While it may be fast and exciting, cars like this are:
- requiring constant maintenance and fine tuning;
- hopelessly impractical.
Ok, so what about this instead?
- mechanically simple;
- able to deal with (almost) anything placed in front of it.