Hamer disclosure excerpt:
Our strategy is based on an old premise: that currency and commodity price trends can be exploited. There are very few people who can predict market moves for any length of time with any real consistency, but mechanical trading systems, with proper risk control, can capture a portion of these market moves (trends) over time and provide reliable and consistent returns. Trends can occur in multiple time periods: Long term, intermediate term, and short term. Jim Hamer has utilized his computer programming knowledge to test and develop systems that show excellent results in each of these time frames. There are opportunities found in the three time frames but equally important, trading three different time frames provides a means of diversification. Approximately 60% of the funds are allocated to a long term trend following approach that, unlike typical trend following strategies, uses proprietary profit targets. This approach can provide profits even when short lived trends develop. 25% of the funds are allocated to shorter developing trends. This approach can and will earn profits on long term trends, but it reacts to trend changes quicker than the longer term.
Hamer Trading principals include: James Hamer.
From Lumber to the Trading Floor
Jim Hamer graduated from West Virginia University and began his career in his family’s lumber business. After years in that industry, he pursued a different path and became a member of the Chicago Mercantile Exchange in the late 1980s. As a floor trader he focused on stock index and currency futures. He left the floor to move into portfolio management and sought out one of the most respected mentors in the industry: Ed Seykota.
That career sequence, from a physical commodity business to a trading floor to systematic portfolio management, is not uncommon in the trend following world. The lumber business develops an understanding of commodity price cycles, seasonal patterns, and the way supply and demand dynamics drive prices over long periods. Floor trading develops execution skill and an intuitive feel for how markets move in real time. Systematic portfolio management takes those inputs and structures them into a repeatable, rules-based approach that does not depend on the trader being present at every moment to make decisions. Hamer moved through all three stages before building Hamer Trading.
Ed Seykota’s Influence
Ed Seykota is one of the foundational figures in the history of systematic trend following. He turned $5,000 into $15 million over twelve years in a managed account and developed one of the first computerised trading systems in the early 1970s. His list of students includes Michael Marcus and David Druz, both of whom went on to build their own distinguished careers as systematic traders. Hamer joined that lineage when he secured Seykota’s training.
Under Seykota’s guidance, Hamer learned the two things that Seykota considered most important: risk management and systematic trend following technique. Those two elements are inseparable in the approach Seykota built. Risk management without a systematic trend following framework is just caution. Systematic trend following without risk management is speculation with undefined downside. Together they define an approach that can participate in long-duration price moves while controlling the magnitude of losses when a trend fails to develop.
The Three Time Frame Approach
Hamer’s disclosure document describes a system that allocates across three time horizons: long term, intermediate term, and short term. The 60 percent allocation to the long-term approach reflects the standard trend following view that the largest and most reliable returns come from catching major multi-month moves in currencies and commodities. The remaining 25 percent addresses shorter-developing trends.
The diversification benefit of trading multiple time frames is structural. Long-term trend following systems can go through extended periods of flat or negative performance when markets are choppy and trends fail to persist. A shorter-term component that reacts faster to trend changes can generate returns during those periods, reducing the depth and duration of drawdowns without sacrificing the long-term trend following edge. This is the same logic behind the portfolio construction thinking in the TurtleTrader rules: diversification across uncorrelated exposures reduces variance while preserving the ability to capture major trends when they develop.
The use of proprietary profit targets in the long-term component is a departure from the standard trend following approach, which uses trailing stops rather than fixed profit objectives. Hamer’s disclosure notes that this modification allows the system to capture profits even from short-lived trends that would not generate a sell signal under a purely trailing-stop approach. The trade-off is that a fixed profit target will exit a position before a trend has run its course if the target is hit early. The 60 percent allocation to that component reflects a deliberate balance between capturing short-lived moves and staying in longer trends.
Hamer’s Books on Trading
Hamer also contributed to trading education through his reading recommendations. His short list of market books includes Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, Reminiscences of a Stock Operator by Edwin Lefèvre, and The Crowd by Gustave Le Bon. The common thread in all three is human behaviour in groups: how crowds form opinions, how those opinions drive asset prices away from rational equilibrium, and how the individual who understands that dynamic can position on the other side of consensus error. That is, at its core, the intellectual foundation of trend following.
Frequently Asked Questions About Jim Hamer
Who is Jim Hamer?
Jim Hamer is the principal of Hamer Trading, a systematic trend following CTA. He graduated from West Virginia University and began his career in his family’s lumber business before becoming a Chicago Mercantile Exchange floor trader in the late 1980s. He was trained by Ed Seykota, one of the foundational figures in systematic trend following, and built a multi-time-frame trading system using his computer programming background.
What is Hamer Trading?
Hamer Trading is Jim Hamer’s systematic futures trading firm. The strategy allocates approximately 60 percent of funds to a long-term trend following approach with proprietary profit targets and 25 percent to shorter-term trend systems. The multi-time-frame structure provides diversification across trading horizons and reduces the drawdown profile of a purely long-term trend following approach.
How does Hamer connect to Ed Seykota?
Hamer is one of several traders who secured Seykota’s direct training. Seykota’s other students include Michael Marcus and David Druz, both documented in Market Wizards. Hamer learned risk management and systematic trend following technique under Seykota’s guidance. The Hamer Trading disclosure document reflects that foundation: mechanical systems with proper risk control capturing a portion of price trends over time.
What makes the three time frame approach distinctive?
Most systematic trend following operations focus on a single time horizon. Trading across long, intermediate, and short time frames provides a structural diversification benefit: when the long-term component is in a drawdown because markets are choppy, the shorter-term components can generate offsetting returns. The approach also uses proprietary profit targets in the long-term component, which is unusual in trend following and allows the system to capture returns from trends that reverse before generating a trailing stop signal.
Trend Following Systems
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