We are,at the end of the day,Traders.Our job is a frontal assault on the markets,all with an equanimous mind,neither euphoric nor depressive,absolute still….and a Method that retains its simplicity and helps us to achieve the dual goal of profits with equanimity.

Starting a new thread but am not sure where it shoud go (once again).

Request to Mods to shift it to proper location

Thanks
Rajesh

Michael Covel (February 15, 2005)

The following interview is with second generation Trend Follower Thomas Arnold. He offers insight to new and established traders considering Trend Following.

Q. How did you become involved in the markets?
A. I have been interested in trading for as long as I can remember. My first job was working for a very successful stock trader in Los Angeles who was a friend of my father's. Every Saturday I would obtain a copy of the Daily Graphs. I would then look at each and every chart, that is, every stock on both the American and New York Stock Exchanges. I was looking for specific chart patterns accompanied by higher than usual volume. By midday on Saturday, I would bring my analysis to my father's friend, and for my efforts I would receive a crisp $100 bill. I'm not sure if it was the hundred bucks or the market analysis. But somehow, I was irrevocably involved in the markets.

Q. Before you learned Turtle Trend Following why did you feel it would help you?
A. I knew enough about Trend Following to know that it was not just another indicator or analytical approach. I knew there was some real mathematics involved, and by that I mean there was substance which I could prove or disprove objectively. It wasn't a holy grail, it was an edge. And for that reason I was interested. Also, I could not ignore the fact that Richard Dennis was spectacularly successful.

Q. When you say some real math was involved you seem to imply you were ready for a more concrete, dispassionate style of trading?
A. Absolutely. I was not interested in an approach that simply re-tooled what I was already doing. At the time, I was an interbank currency trader. I took positions up to a size I felt comfortable, based upon technical analysis and deal flow. There was very little objectivity in that mix. I was interested in building an investment business, one that was scalable and not based upon subjective analysis. If my position size was based upon my comfort level, there was a very real and nearby limit to the business I could build. Secondly, I desired to remove emotions as completely as possible from my trading. Position size must be calculated based upon market volatility and assigned per position risk.

Q. Talk about the use of money management in your trading?
A. Money management is 90% of what we do. At the risk of frightening investors, I'm not sure my performance would suffer tremendously if I flipped a coin to determine our direction. To be fair, we have come a long way in selecting our trades and managing the risk profile of our portfolio. But the real driver of our success is how we size our positions at the beginning of a trade, how we add to our positions when we are right, and where we place our stops when we are wrong. Our goal is that our profits are exponential, and losses are linear.

Q. Why do you think directional accuracy seems to excite many beginners and pros alike? Is it the false sense of comfort they enjoy with a high accuracy?
A. I think most novice traders feel that directional accuracy is the key to trading success. It really doesn't bother me if they continue to think so. Having been a trader on several major currency desks, I have heard endless recounts of traders calling the market correctly. It seems traders desire to be right, more so than they desire to be profitable. If this were not the case, they would spend a lot more time focusing on the money management aspect of their trading. Of course this is a personal account as well, in that being right was my focus for over ten years.

Q. How do you explain profits as exponential and losses as linear?
A. We never add to a losing position. We add mechanically to winning positions. And we only add to winning positions when we can do so without substantially adding risk to original capital. Therefore we can be wrong several times and right once, and still perform well. The alternative would be to keep your position size the same on a winning position, which means you have to be right substantially more often, and you would have to allow your position to go much further. We desire that our winning positions be far more dynamic than our losing ones.

Q. You bring up an interesting point traders desire to be right more than they desire to be profitable. You seem to make the case clearly that no matter the level of sophistication, most traders are not even focused on profits in all reality?
A. I think that is an accurate statement. The vast majority of traders fail to view trading as a business. To be successful over the long term you have to build your trading strategy the same as you would build your business. Trading is not about intellectual triumphs. It is about creating a reasonable, objective expectation for success over time.

Our testimonials, endorsements, interviews and feedback come from a wide assortment of individuals. From new and experienced individuals trading their own account to start-up money management firms to more established banks: all of the input about our firm is useful.

//From http://www.turtletrader.com//

To begin, for many traders greed is a stronger emotional force than fear. I believe we are a greedy lot (that's why we
enter an arena others pass on). Thus, one needs to know what emotion is gaining the upper hand in his or her daily life,
be it in the markets or business.

Greed, as I have come to understand it causes us to do that which we should not! It is greed that is the active force,
kicking us in, causing us to jump the gun, to hold on too long, to buy too much. Hence if you feel greed seeping inside
you, I suggest you look it directly in the face to see if it is leading you into more trouble than reward.
Fear is different. Our fears cause us to not do what we should do. President Roosevelt had the all time worst comment
saying, "…all we have to fear is fear itself." But then, what would you expect from a socialist who, along with Colonel
House, did more to damage this country on a long-term basis than anyone before or since? I digress…
Fear is prohibitive - it puts on the brakes. It is preventive and it is very primal as it is more closely connected to
survival. Indeed, we need a healthy dose of fear to keep on living. But life, or event fear, is not the same as market fear.
For some unexplainable reason, we pass on the best or largest winning trades out of pure adrenaline spouting fear. We
don't place stops for fear we will be stopped out. My advice is when your fear emotions tell you to not do something, in
this business, as Nike says, "Just Do IT!”. Scary thought – but that is why top traders are successful they do just do it.
There are two important parts to fear; the first is why it happens, the second is what it makes you do. Fear is the
product of unknowing. A seal team buddy of mine said it best, "Whenever we went on a shoot and loot mission my
heart was pumping but it was not from fear. We were so well trained and armed that every unknown was known. We
knew what to do and how to react to any contingency". Traders are not so well prepared. They have not thought out
the future, they trade with no stops (protection) and trade with no idea of where or how to take profits. Hence all of
the future is unknown. It's a black hole and they are afraid of the night.
To shut down on your fears prepare for the future, and have all bases covered and you will be able to act, not react
to market events.

The next point is that fear causes us to lie. Traders lie about their trades, wins or losses, especially to their spouses,
so they are in a state of constant denial and fabrication, a dream world. It's no wonder they don't deal well with
reality