Richard Dennis was interviewed nearly 20 years ago. His thoughts and insights are timeless. Ignore his wisdom at your own peril.
On Trading Plans
I’m relaxed at what I am doing [trading] because I have a plan. I know what I want to do, and I am really trying to execute it. I think most traders do too much thinking on the spot. They should come in with 90% of the decisions made and just be putting the frosting on the cake.
On What Others Think
I suppose I didn’t like the idea that everyone thought I was crazy or going to fail, but it didn’t make any substantial difference because I had an idea what I wanted to do and how I wanted to do it.
On Being Different
I learned everything the hard way. You are looking at the most anti-intuitive trader in the world.
On Profit Taking
When you have a position, you put it on for a reason, and you’ve got to keep it until the reason no longer exists. Don’t take profits just for the sake of taking profits. You have to have a strategy to trade, know how it works and follow through on it.
On Uselessness of Fundamental Analysis
I agree with the metaphysics of technical analysis that the fundamentals are discounted. You don’t get any profits from fundamental analysis; you get profit from buying and selling. So why stick with the appearance when you can go right to the reality of price and analyze it better?
On Human Nature
To follow the good [trading] principles and not let fear, greed, and hope interfere with your trading is tough. You are swimming upstream against human nature.
On Measuring Success
There’s nothing quite as good or bad as trading. They give you a number every day. That’s what’s good about it, and that’s what’s bad about it. That’s what makes it hard. That’s what makes it worth doing.
What Dennis’s Quotes Teach
The seven passages above were recorded nearly two decades ago and have not dated. Each addresses a structural feature of trading that does not change with market conditions, technology, or regulatory environment.
The “90% of decisions made before you walk in” formulation is Dennis’s statement of the pre-commitment principle. The frosting metaphor is precise: the cake is already made. The systematic rules were defined in advance. The daily execution is the application of those rules to the day’s price data, not the construction of the rules in real time. A trader who comes in with only 10% of decisions made is operating like a chef who decides what dish to cook after looking at each ingredient individually. The systematic trader comes in knowing the recipe.
The “anti-intuitive” self-description is the honest assessment of what systematic trend following requires. Buying at new highs is anti-intuitive. Holding through adverse moves is anti-intuitive. Cutting losses before they become large is anti-intuitive when the position might reverse. Every decision that makes systematic trend following work is the decision that human nature resists. Dennis built his approach to be anti-intuitive by design, because he understood that the intuitive decisions were the ones that lost money.
The fundamental analysis passage is the clearest practitioner statement available of the efficient market insight applied to trading. You do not get profits from analysis. You get profits from buying and selling. The analysis that explains why you should buy or sell is already reflected in the price. Going directly to the price eliminates the intermediate step of analysis while accessing the same information in more condensed form.
The “number every day” observation is the honest accounting of trading’s psychological difficulty and its distinctive reward. There is nowhere to hide in trading. The account value is the verdict. Most professionals can rationalize their performance through narrative: the project was difficult, the circumstances were unusual, the metric is unfair. Trading provides no such rationalization. The number is the number. Dennis finds this simultaneously the hardest and most valuable feature of the profession.
Frequently Asked Questions
Why does Dennis say traders should come in with 90% of decisions already made?
Because decisions made in advance of market exposure, before the emotional states that live price action creates, are more accurate than decisions made in real time. The plan defines what to buy, when to buy it, how much to buy, and when to exit. The execution applies the plan. A trader who is still making these decisions while watching prices move is making them under exactly the conditions that produce the fear, greed, and hope that Dennis identifies as the obstacles to good trading.
What does Dennis mean by calling himself the most anti-intuitive trader in the world?
That his trading rules consistently require actions that feel wrong to human intuition: buying at new highs when prices feel expensive, cutting losses when the position might reverse, holding winners through adverse moves when locking in profits feels safer. Every rule in his systematic approach is the opposite of what the natural human response to market price movement produces. He built the system specifically to override those natural responses because he recognized that the natural responses were the losing ones.
Why did Dennis say fundamental analysis produces no profits?
Because by the time fundamental analysis is complete, the information it is based on is already reflected in the price. The profits come from the trading decisions, not from the analysis. The price already contains the aggregate of all participants’ fundamental assessments. Going directly to the price, and using rules to respond to its movement, accesses that aggregate without the intermediate step of analysis that has already been completed by the market.
Trend Following Systems
Want to learn more and start trading trend following systems? Start here.
