Clenow - Following the trend diversified managed futures trading

2013 Andreas F. Clenow

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ISBN 978-1-118-41085-1 (hbk) ISBN 978-1-118-41082-0 (ebk)
ISBN 978-1-118-41083-7 (ebk) ISBN 978-1-118-41084-4 (ebk)

To my wonderful wife Eng Cheng and my son Brandon
for their love and patience

Foreword

This book is an excellent training manual for anyone interested in learning how to make money as a trend follower.

I know a bit about trend following because I was part of the famous Turtle experiment in the 1980s when Richard Dennis, the Prince of the Pits, showed the world that trading could be taught and that people with the right sort of training and perspective could make consistent returns that far exceeded normal investments. Ultimately, that ordinary people could learn to trade like the most successful hedge funds. I started as a 19-year-old kid and by the time I was 24 in 1987, I took home $8 million, which was my cut of the $31.5 million I earned for Richard Dennis as a trend follower.

I even wrote a book about it, Way of the Turtle . It became a bestseller because many traders wanted to know the secrets of our success and to hear about the story first-hand which had been kept secret because of confidentiality agreements and our loyalty to Richard Dennis, a great man and a trading legend.

Id thought about writing a follow-on book a few times in the intervening years; something meatier and with more detail. My book was part-story and part-trading manual and I thought about writing a book that was all trading manual.

In Following the Trend , Andreas Clenow has written a trend-following trading manual I would be proud to put my own name on. Im very picky too, so I dont say this lightly.

Very few trading books are worthy of an endorsement of any sort. Too many are filled with tips and tricks that dont stand the test of the markets, let alone the test of time. Too many are written by those who are trying to sell you something like a course, or their seminars. Too many want your money more than they want to create an excellent book.

Thats why I dont often speak at conferences and you wont see me endorsing many books. There is too much self-serving propaganda in the trading industry that makes its money by fleecing the unsuspecting newcomers; too many lies designed to rope in the neophytes with promises of easy profits and quick money that will never pan out.

Following the Trend is different .

It is solid, clearly written, covers all the basics, and it doesnt promise you anything that you cant actually get as a trend follower.

If you want to be a trend follower, first, read Reminiscences of a Stock Operator to learn from Jesse Livermore. Then, buy Jack Schwagers Market Wizards books to learn about the great traders who have been trend followers, like Richard Dennis my trading mentor, Ed Seykota, Bill Dunn, John W. Henry, and Richard Donchian. They will get you excited about the possibilities but leave you wondering how; how can you too learn to be a trend follower?

Then, when you are ready to move from desire to reality. When you are ready to do it yourself. To make your own mark.

Read Following the Trend .

Curtis Faith
Savannah, GA U.S.A.

Preface

This book is in essence about a single trading strategy based on a concept that has been publically known for at least two decades. It is a strategy that has worked remarkably well for over 30 years with a large number of hedge funds employing it. This strategy has been given much attention over the past few years and in particular after the dramatically positive returns it generated in 2008, but it seems nevertheless to be constantly misunderstood, misinterpreted and misused. Even worse, various flawed and overly complicated iterations of it are all too often sold for large amounts of money by people who have never even traded them in a professional environment. The strategy I am alluding to goes by many names but it is in essence the same strategy that most trend-following futures managers (or CTAs for Commodity Trading Advisors if you prefer) have been trading for many years.

This book differs in many ways from the more traditional way in which trading literature tends to approach the subject of trend-following strategies. My primary reason for writing this book is to fill a gap in that literature and to make publicly available analyses and information that is already known by successful diversified trend followers, but understood by few not already in this very specialised part of the business. It is my belief that most books and therefore most people aspiring to get into this business are focusing on the wrong things, such as entry and exit rules, and missing the important aspects. This is likely related to the fact that many authors dont actually design or trade these strategies for a living.

There have been many famous star traders in this particular part of the industry and some of them have been raised to almost mythical status and seen as kinds of deities in the business. These people have my highest respect for their success and pioneer work in our field, but this book is not about hero worship and it does not dwell on strategies that worked in the 1970s but might be financial suicide to run in the same shape today. The market has changed and even more so the hedge-fund industry and I intend to focus on what I see as viable strategies in the current financial marketplace.