John is a client. He wrote to us from New Zealand to express his thoughts on the benefits of Turtle [Trend Following] trading: Since completing your course earlier this year I have managed my drawdowns with dramatic results. We decided an interview would be appropriate and useful for others. John agreed.
Q: Why did you decide to become a TurtleTrader client?
John: To establish a systematic correlation between portfolio size, bet size and stop loss placement. Having developed various buy/sell signal systems over many years which ranged from moving average to Donchian to Neural Networks I have proved that pure signal strength is not a great indication of suitable bet size and may lead to drawdowns in excess of expectations. Such drawdowns suggest that fund longevity is compromised, therefore by reducing risk longevity is more probable.
Q: You make the strong point that not only does money management help your upside, but more importantly it protects your downside. I am sure you would agree that many new and experienced traders neglect the importance of mitigating drawdown?
John: Correct. There is no point in being able to make double/triple digit percentage gains only to give the same plus back to the market. To be successful you need to keep a high proportion of your gains.
Q: What was your prior knowledge of trend following?
John: All of the systems that I have developed have included to some extent trend following criteria. Even Neural Networks, when considering market entry and exit costs (commission and slippage) tended towards the utilization of trends to make the bulk of their gains. In markets where liquidity is high, trend following is especially appropriate as entering and exiting positions will not materially affect the market price. This however would not be the case in illiquid markets where the entering and exiting of positions can materially affect the market price. In the later situation a fundamentalist approach may be appropriate.
Q: While we make no recommendation to fundamental trading. You paint a picture whereby fundamental traders could benefit from a clear understanding of Trend Following trading.
John: Certainly, Turtle [Trend Following] addresses risks which can help all.
Q: What about our course enabled you to reduce your drawdown? The overall money management provided?
John: The linking of bet size to portfolio size/stop losses and also the growth and shrinkage of the total portfolio size including unrealized gains.
Q: Was this a comfortable switch for you? The consideration of total capital for trading decisions? Were you nervous about changing from your current strategy or was it more of a natural and logical evolution for you?
John: This was a logical evolution as I was searching for risk management methods. I was not nervous about the progression as I thoroughly understood the methods practiced by Turtle [Trend Followers] and then created a financial model and performed rigorous testing before adopting Trend Following.
Q: Had you been using money management prior to our course?
John: The money management previously used was associated with bet success probability rather than portfolio size and thus when calculating monthly percentages against capital invested, undesirable percentages could arise.
Q: Thanks for the feedback John.
John: You are welcome.
Our testimonials, endorsements, interviews and feedback come from a wide assortment of individuals. From new and experienced individuals trading their own account to start-up money management firms to more established banks: all of the input about our firm is useful.
