Closed Balance Equity: Sizing from Realized Capital

Richard Brennan returns this week to explore how markets truly move - not through randomness or rationality, but through impact, feedback, and memory. What begins with a single trade builds into structure, not pattern; alignment, not noise. Drawing from neuroscience and fractal geometry, Rich challenges the idea that markets can be understood without understanding interaction. The episode builds toward a pointed exchange on position sizing - closed equity versus dynamic exposure - not as a technical footnote, but as a reflection of first principles. In a system where the path shapes the outcome, how you define risk... often reveals how you think the world works.

-----

50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE

-----

Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.

IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.

And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.

Learn more about the Trend Barometer here.

Send your questions to info@toptradersunplugged.com

And please share this episode with a like-minded friend and leave an honest Rating & Review on iTunes or Spotify so more people can discover the podcast.

Follow Rich on Twitter.

Episode TimeStamps:

00:00:00 – Welcome to the Systematic Investor Series

00:00:23 – Niels’ intro, show setup, and warm welcome to Rich

00:00:57 – Heatwave down under: context and small talk

00:02:10 – Rich: divided brain, AI vs embodiment, and markets needing rules

00:07:50 – AI’s edge shrinks prediction windows; why that helps trend following

00:10:35 – Gold’s violent selloff; electricity vs oil as the new macro lens

00:14:51 – “Trend heaven”: why the backdrop now looks robust

00:18:12 – Post-GFC compression vs today’s decoupling and trends

00:22:43 – Impact and reflexivity: trades reshape the next trade

00:28:23 – Non-ergodic markets: path dependence beats Gaussian assumptions

00:35:48 – Volatility ≠ risk: compression warehouses latent tail risk

00:40:08 – Engineer robustness, don’t optimize to statistics

00:49:41 – From micro impulses to structure: feedback builds trends

00:50:06 – Patterns vs structure; outliers as phase transitions

00:55:00 – Ensemble design: behavioral (not correlational) diversification

01:03:05 – Survival first: closed-equity sizing in a non-ergodic world

01:05:43 – Niels’ counterpoints: dynamic sizing, flows, and “cutback” debate

01:12:20 – Rich: why he frames it as outlier hunting

01:16:30 – Wrap-up, programming notes, and disclaimer

Copyright © 2025 – CMC AG – All Rights Reserved

----

PLUS: Whenever you're ready... here are 3 ways I can help you in your investment Journey:

1. eBooks that cover key topics that you need to know about

In my eBooks, I put together some key discoveries and things I have learnt during the more than 3 decades I have worked in the Trend Following industry, which I hope you will find useful. Click Here

2. Daily Trend Barometer and Market Score

One of the things I’m really proud of, is the fact that I have managed to published the Trend Barometer and Market Score each day for more than a decade...as these tools are really good at describing the environment for trend following managers as well as giving insights into the general positioning of a trend following strategy! Click Here

3. Other Resources that can help you

And if you are hungry for more useful resources from the trend following world...check out some precious resources that I have found over the years to be really valuable. Click Here

Privacy Policy

Disclaimer