The Trick to Trend Following Is to Think

“Ah, what a nice web site! Lots of impressive words…Simple logic defeats you. If all take your advice on trending, all will equally loose, due to no trending when all think they see the same trend…Warren Buffett has always been right: buy undervalued stocks in excellent companies and hold the stock until it returns a nice profit. Making decisions to buy or sell based on lines on a chart is shear idiocy.”
J Mason

The above email arrived at TurtleTrader. Let’s address his issues:

1. If everyone trades as a trend follower there will be no opportunity is his position. The facts show otherwise:

  • Read link #1
  • Read link #2
  • In reality it works since so many people mistakenly view and trade the market just as you do. Your losses fuel trend following winners.

2. Our view on Buffett that he doesn’t like:

3. Trend following does not involve chart reading or lines on a chart.

4. His real issues are related more to his own psychology. Two quotes he must ponder:

“Perhaps the most important revelation coming out of current research on the biology of the mind is this: that the left cerebral hemisphere of humans is prone to fabricating verbal narratives that do not necessarily accord with the truth. We call this part of the brain the interpreter and it is the sources of familiar internal narratives that give us our sense of self.”
Antonio Damasio

“The left brain weaves its story in order to convince itself and you that it is in full control. What is so adaptive about having what amounts to a spin-doctor in the left brain? The interpreter is really trying to keep our personal story together. To do that we must lie to ourselves. Often when we think we’re being rational, we’re being spun by our own thinking. We believe our own press releases. This explains how we get ourselves into painful positions.”
Michael Gazzaniga

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