Tips from the Great Trend Trader Amos Hostetter, Sr.

Amos Hostetter, Sr., the once wise sage of Commodities Corporation, offered wisdom we felt worth sharing.

Amos Hostetter: Trading Dont’s

• Don’t sacrifice your position for fluctuations.
• Don’t expect the market to end in a blaze of glory. Look out for warnings.
• Don’t expect the tape to be a lecturer. It’s enough to see that something is wrong.
• Never try to sell at the top. It isn’t wise. Sell after a reaction if there is no rally.
• Don’t imagine that a market that has once sold at 150 must be cheap at 130.
• Don’t buck the market trend.
• Don’t look for the breaks. Look out for warnings.
• Don’t try to make an average from a losing game.
• Never keep goods that show a loss, and sell those that show a profit. Get out with the least loss, and sit tight for greater profits.

Amos Hostetter: Dangers in Trading caused by Human Nature

• Fear: fearful of profit and one acts too soon.
• Hope: hope for a change in the forces against one.
• Lack of confidence in ones own judgment.
• Never cease to do your own thinking.
• A man must not swear eternal allegiance to either the bear or bull side.
• The individual fails to stick to facts!
• People believe what it pleases them to believe.

Think about how simple Hostetter’s wisdom appears on the surface. But how many adhere to such principles?

Who Was Amos Hostetter?

Amos Hostetter Sr. was a commodities trader at the brokerage firm of Hayden Stone who made money in commodities for fifty consecutive years. He was the mentor and father figure of Helmut Weymar, the MIT-trained economist who founded Commodities Corporation in Princeton in 1969. Hostetter agreed to trade part-time for the new firm and became its elder statesman. When Nobel economist Paul Samuelson, who was on the Commodities Corporation board, was asked about Hostetter, he said: “He was the most remarkable investor I ever knew. He made money in commodities 50 years straight.”

Hostetter died in a 1977 automobile accident. He was in his seventies. In the years he traded for Commodities Corporation, he not only produced returns but shaped the firm’s thinking about how to approach markets. He sided with Weymar when the technical trading argument came up against the random-walk theorists on the board. He never bucked a price trend for long, regardless of what the fundamental picture said. That stance, taken by a trader who had spent fifty years in commodity markets, carried authority that no academic argument could match.

The Hostetter Position-Building Method

Commodities Corporation studied Hostetter’s old trading accounts and computerised the history of how he had built positions over time. What they found became an informal set of guidelines for the firm’s other traders.

His approach was staged. When a market’s supply-and-demand prospects looked favourable, he put up one-third of his planned position. If the market moved his way, he added another third. He took the final position when prices had climbed about half as far as he thought they would go. This pyramid structure, starting small and adding on confirmation, is the same architecture that the TurtleTrader rules encode in their unit-based entry system. Enter on a breakout, add on continuation, size the position relative to volatility rather than conviction.

Hostetter’s method predated the formalisation of trend following by decades. He was not working from a computer model. He was applying a consistent approach that he had refined over fifty years of observing how commodity price moves develop, pause, and extend. The fact that Commodities Corporation could formalise and computerise that approach after his death tells you how systematic it already was. A purely discretionary trader leaves no reproducible method. Hostetter left one.

Reading the Trading Dont’s

The nine rules on this page look simple. Each one is a sentence or less. But each targets a specific failure mode that costs traders money and that the research literature on trading psychology has since confirmed at length.

“Don’t sacrifice your position for fluctuations” is the instruction to distinguish noise from signal. A position that is right on the larger trend will move against you within that trend. Exiting on short-term adverse movement is the single most common way to lose the gains from a trade that was right.

“Never keep goods that show a loss, and sell those that show a profit. Get out with the least loss, and sit tight for greater profits” is the entire trend following philosophy in one sentence. Cut losses short. Let winners run. The asymmetry between those two instructions is where systematic trading edge comes from.

“Don’t buck the market trend” and “Don’t imagine that a market that has once sold at 150 must be cheap at 130” attack two forms of the same error: the belief that a trader’s opinion of value should override the signal that price is providing. A market at 130 that was at 150 is not cheap. It is in a downtrend. Hostetter had learned this, the hard way and the research way, fifty years before the trend following literature formalised it.

The Human Nature List

The seven items under “Dangers in Trading caused by Human Nature” are a precise taxonomy of the psychological failures that override good trading systems. Fear of profit causes premature exits. Hope for a reversal causes traders to hold losers past the point of rational exit. Lack of confidence in one’s own judgment causes traders to abandon systems that are working because someone else’s opinion sounds more authoritative.

“People believe what it pleases them to believe” is the most fundamental observation on the list. A trader who wants a position to work will find reasons to hold it past the exit signal. A trader who has declared a view in public will defend that view even as the market moves against it. These are not character flaws. They are structural features of human cognition that systematic trading is designed to bypass. The system does not believe what it pleases it to believe. It reads price and acts on the signal.

This is why Hostetter’s wisdom connects to everything that Richard Dennis, Ed Seykota, and the entire trend following lineage built after him. The rules are not complex. The obstacle is the human nature list.

Frequently Asked Questions About Amos Hostetter

Who was Amos Hostetter Sr.?

Amos Hostetter Sr. was a commodities trader at Hayden Stone who made money in commodity markets for fifty consecutive years. He was the mentor of Helmut Weymar, who founded Commodities Corporation in 1969, and served as a part-time trader and elder statesman for that firm. Paul Samuelson described him as the most remarkable investor he ever knew. Hostetter died in an automobile accident in 1977.

What was Hostetter’s connection to Commodities Corporation?

Weymar had known Hostetter since childhood, as Hostetter was the father of a childhood friend. When Weymar founded Commodities Corporation, he invited Hostetter to trade part-time for the firm. Hostetter sided with the technical trading faction over the random-walk theorists on the board. His historical trading accounts were computerised by the firm after his death, and the patterns they revealed became informal guidelines for Commodities Corporation’s other traders.

What was distinctive about his position-building method?

Hostetter entered positions in thirds. He put up one-third when the fundamental picture looked favourable, added a second third when the market moved his way, and took the final third when prices had climbed about half as far as he expected them to go. This staged approach to position building, entering small and adding on confirmation, mirrors the unit-based entry system in the TurtleTrader rules and is a precursor to the modern systematic approach to scaling into trends.

Why do Hostetter’s rules still matter?

Because the failure modes they address have not changed. The fear, hope, and cognitive biases that Hostetter identified in his human nature list are the same ones that Charles Faulkner, Jack Schwager, and every serious trading psychologist has documented in the decades since. The rules that counter those failure modes, cutting losses, following price trends rather than opinions, not averaging losers, are as applicable today as they were when Hostetter was trading at Hayden Stone.

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