Tom Basso is one of the most respected systematic trend following traders of his generation. Jack Schwager dubbed him “Mr. Serenity” in The New Market Wizards — a nickname that captured something precise about his approach to markets. Where most traders are driven by emotion, urgency, and the need to be right, Basso built a career on the opposite: calm, systematic discipline, and an engineering-like detachment from the outcome of any individual trade.
He founded Trendstat Capital Management in 1979, ran it for over two decades, grew assets to roughly $600 million at peak, and delivered decades of steady returns with low drawdowns. His philosophy has influenced a generation of systematic traders. Michael Covel’s book Trend Following Mindset is built on their conversations about trend following, psychology, and what it takes to build a trading career that lasts.
Tom Basso – Top Trend Following Trader
Tom Basso in His Own Words
The following is Tom Basso on the relationship between trend following and large market moves, using the famous 1992 Soros/pound trade as a reference point:
“George Soros has made a lot of money on shorting the British pound and he might have fundamental reasons because he maybe knows a guy from the Bank of England or whatever. But the bottom line is that Trendstat [our firm], who doesn’t know anything about the British economy was in on the same exact trade as Soros, and made a bunch of money too. The thing is that large trends, large movement in the market, are going to create a lot of opportunity. Don’t get hung up too much on the buy/sell decision engine on where do you want to buy and where do you want to sell. Because in the end, large movements are going to probably create most of your profits. And that goes for short term trading and long term trading alike. Short term trading you get in and lose one thing that was in your favor and it turns around on you and you have to blow out of it, it’s not going to do you any good. You’ve got to have the big trend. Sure there are the trends in the short term in the day trading or a smaller trend in the big one. But hey if you put a day chart over on the wall or a tick chart over on the wall or if I put a daily chart and I walk across, they all kind of look the same from a distance.”
This passage contains one of the most direct statements of systematic trend following philosophy from any practitioner on record. The point is not that fundamental analysis is wrong. The point is that a trend following system, with no knowledge of British monetary policy, no contacts at the Bank of England, and no macroeconomic forecast, captured the same trade as one of the most sophisticated macro traders in the world. The signal in the price was enough. The system did the rest.
The instruction to not get “hung up on the buy/sell decision engine” connects to the TurtleTrader rules. Entry points matter, but they are not the primary source of returns. The large trend — held through volatility with discipline — is where the performance comes from.
Tom Basso’s Original Research Studies
These are three original research studies by Tom Basso, available as documents. They represent his systematic, analytical approach to trend following questions that most traders answer with gut feeling rather than data.
These studies reflect the engineering mindset that Basso brought to trend following. Rather than accepting received wisdom about how markets work or how portfolios should be managed, he ran the numbers. The volatility study, the drawdown study, and the re-balancing study each address a question that shapes the performance of any systematic trend following strategy.
From Chemical Engineer to Trend Following Trader
Basso did not come to trading through Wall Street. He was a chemical engineer, and the discipline of that background shaped how he approached markets. He started trading as a side project while working as an engineer, studying price patterns, building systems on early computers, and asking the same question an engineer would ask: can this process be made more consistent, more reliable, and less dependent on human judgment?
The answer, he found, was yes. By applying systematic trend following rules to futures markets — clear entry signals based on price breakouts, defined exit rules, and position sizing based on volatility — he removed emotion from the process. The goal was not to predict markets. It was to build a system that reacted to them with consistency.
He left engineering in 1980, launched Trendstat Capital, and spent the next two decades refining and running one of the most disciplined trend following operations in the industry. At its peak the firm covered roughly 80 futures markets, 30 currency markets, and 20 mutual funds using a fully automated, rules-based system.
The “Moon” Trade: Letting Profits Run
One of the most quoted stories in trend following circles comes from Basso. A new trader approaches an old trend follower and asks: “Where’s your objective on this trade?” The old trend follower replies that his objective is for the position to go to the moon. He adds: “I have not had one get there yet, but maybe someday.”
This story captures the central insight of trend following in a single exchange. The moment you set a profit target, you interrupt the trend. You exit a winning position based on a prediction about where the market should stop, rather than letting the market tell you where it stops. Every major trend following return in history came from positions held far longer, and running far further, than most traders would have predicted.
Psychology First: The Basso Framework
Basso’s hierarchy of what matters in trend following runs counter to how most traders think about their craft. He places investment psychology at the top, risk control second, and entry and exit signals last. In his view, entry points account for roughly 10 percent of long-term trend following success.
This stands in sharp contrast to the way most people approach markets, where the obsession is with finding the perfect entry point. His argument is that a system with strong psychological discipline and strong risk management will outperform a system with a perfect entry but neither of those things.
Key Facts About Tom Basso
- Nicknamed “Mr. Serenity” by Jack Schwager in The New Market Wizards
- Founder and president of Trendstat Capital Management, launched 1979
- Managed roughly $600 million at peak using systematic trend following
- Formerly a chemical engineer — applied engineering discipline to market systems
- Featured in Michael Covel’s Trend Following Mindset book
- Runs enjoytheride.world, dedicated to trader education
- Current chairman of Standpoint Funds applying all-weather systematic strategies
Frequently Asked Questions About Tom Basso
Why is Tom Basso called Mr. Serenity?
Jack Schwager gave him the nickname in The New Market Wizards to describe his emotional composure under pressure. Where most traders are affected by the volatility of winning and losing, Basso treated both with equal detachment. His serenity was the product of a systematic approach that removed the need for emotional decisions from the trading process.
What was Trendstat Capital Management?
Trendstat was the systematic trend following firm Basso founded in 1979 and ran for over two decades. At its peak it managed roughly $600 million across 80 futures markets, 30 currency markets, and 20 mutual funds using a fully automated, rules-based trend following system.
What does the Basso quote about Soros mean for trend following?
Basso’s point is that a systematic trend following system, with no knowledge of macroeconomic fundamentals, can capture the same directional move as a fundamental trader who has done extensive research. The price signal contains the information. A well-designed trend following system detects that signal and acts on it without needing to know why the market is moving.
What are the three Tom Basso research studies?
They are original research documents addressing three specific questions in systematic trend following: how volatility affects performance, whether buying in drawdown is a valid strategy, and how re-balancing affects long-term returns. They are available as downloadable documents in the section above.
What is the Tom Basso “moon” story?
A new trader asks an old trend follower where his objective is on a trade. The trend follower replies: “to the moon.” He adds that no position has reached there yet, but maybe someday. The story illustrates the core principle of letting profits run without setting arbitrary profit targets that interrupt a trend before it has run its course.
Tom Basso’s conversations with Michael Covel are documented in Trend Following Mindset. For the full TurtleTrader story, read The Complete TurtleTrader.
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