The Misconceptions of Trend Following

In our chat with Nick we discuss system design, the best type of systems to trade, how observations can lead to better strategies, the best way to handle a bear market, measuring system performance, survivorship bias and the difference between successful traders and everyone else. Topics discussed:

• The trading style most people should try first
• Systematic ways to determine a trend
• Why simple systems are the best
• Why broker consensus is a poor indicator
• The best type of stocks for trend following strategies
• What you need to know about a system to be able to handle the drawdown
• How observations can lead to better strategies
• Why buy and hold offers average returns and the best approach to handling a bear market
• How trading can take less than 5 minutes per day
• Measuring the performance of a system
• The difference between very successful traders and everyone else
• The types of survivorship bias that could be ruining your backtest results
• The warning signs of over-optimisation
• Coping with drawdown and personal doubts
• 2 basic strategies you can start testing today!

Disclaimer: Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.