Some claim that trend following trading is no different than the infomercial Wizetrade. For those who do not know or those living overseas, Wizetrade is an infomercial running non-stop here in the United States. It promises clear “signals” for buys and sells. Wizetrade doesn’t tell you how the signals are generated (it is a black box), it just tells you to buy on a “green” light and sell on a “red” light. This might sound very simple (and maybe plain stupid), but it is selling like crazy to those who think they have found a nice and easy alternative to buy and hold.
I don’t see how trend following, as described in my book, is the same as the infomercial Wizetrade. However, it makes me wonder that even if a strategy such as trend following is described in detail, can everyone get “it”?
NOTE: Wizetrade is a Trademark owned by GlobalTec Solutions, LLP. We have no association with Wizetrade. We do not offer or supply Wizetrade products or services.
What Separates Trend Following from Black Box Signal Products
The distinction between trend following and a black box signal product like Wizetrade is not a matter of degree. It is a categorical difference in what the trader is being asked to do and what understanding they are expected to have.
Wizetrade’s green light/red light interface is designed to eliminate the trader’s need to understand anything about the signal’s generation. The trader does not know what indicator is being used, what parameters are set, what historical testing was conducted, or what conditions will cause the system to fail. They are asked to follow the light. The black box is the product’s feature, not its flaw: the absence of understanding is what makes it marketable to people who want results without the work of developing the understanding that produces results.
Systematic trend following is the opposite. The Complete TurtleTrader and the TurtleTrader site document the exact rules, the 20-day breakout entry, the N-based position sizing, the trailing stop exit, the portfolio diversification requirements, and the money management framework in sufficient detail that any practitioner can implement them independently. The trader who understands these rules also understands why they work: because price trends persist due to the behavioral patterns of loss aversion, herding, and anchoring that systematic rules exploit by following price rather than predicting it. The understanding is the product.
The Tropin interview makes the same point about computers: asking a computer to design a trading system produces garbage because the computer has no market logic to constrain the optimization. Wizetrade’s black box has the same property: without understanding the logic behind the signals, the trader cannot assess whether the system has genuine edge or is curve-fitted to historical data. They cannot evaluate when conditions have changed such that the system’s assumptions no longer hold. They cannot adapt the approach when it stops working. They are dependent on the black box in perpetuity.
Covel’s question at the end of the original page, whether everyone can get trend following even when described in detail, is the same question Eckhardt asked before the Turtle experiment. His answer, that exceptional trading requires exceptional talent that cannot be taught, was wrong about the rules but partially right about the commitment. The rules can be taught and documented. The discipline to follow them through extended adverse periods is the variable that determines whether the documented understanding translates into actual trading performance. Not everyone who understands the rules will follow them when following them is hardest.
Frequently Asked Questions
What is wrong with black box trading signals like Wizetrade?
The trader cannot evaluate whether the signals have genuine edge because they do not know how they are generated. Without understanding the logic, the trader cannot assess the system’s assumptions, identify when those assumptions no longer hold, or determine what market conditions the system was designed for. They are entirely dependent on the black box, with no ability to adapt when it fails. Systematic trend following provides the complete logic, allowing the trader to understand, evaluate, and apply the approach independently.
What is the actual difference between trend following and buy-and-hold alternatives?
Buy-and-hold has no exit rule. It commits to a directional position with no defined criteria for when to exit if the position moves against the investor. Trend following defines exit rules before entry: the position is held until the exit condition fires, which is defined by a reversal of the trend rather than by the investor’s comfort level or the broker’s recommendation. The defined exit prevents the 95% drawdown scenarios and the margin call situations that buy-and-hold investors experience during extended bear markets.
Can everyone understand trend following if it is fully explained?
The rules can be fully documented and understood. Whether everyone will follow them consistently through extended drawdowns is a different question. The Turtle experiment demonstrated that some participants had the rules and the discipline to follow them, and some had the rules without the discipline. The rules are the necessary condition. The discipline is the sufficient condition. Both together produce the results the approach generates over time.
Trend Following Systems
Want to learn more and start trading trend following systems? Start here.
