Jerry Parker, a legendary trader and original Turtle Trader, shares his insights on trend following and investment strategies. He discusses the psychological challenges of adhering to a trading system and how his goals have shifted from growth to preservation over time. Jerry highlights the unique return profiles of trend-following strategies and stresses the importance of allowing winning positions to run. He also reflects on retirement, revealing his plan to keep trading as long as possible while navigating the evolving landscape of investing.
Adhering to a trading system is psychologically challenging, as even trained traders like Jerry Parker often struggle with discipline during market volatility.
Long-term goals in trading can shift from aggressive growth to capital preservation, highlighting the psychological stress of avoiding significant losses after initial success.
Successful trading is about emotional resilience and adaptability, requiring traders to evolve their strategies over time while maintaining their core principles.
Deep dives
The Challenge of Following a Trading System
The podcast highlights the difficulties traders face in adhering to a structured system, particularly in the context of the turtle trading program. Despite rigorous training, individuals often struggle to trade according to preset rules, as illustrated by Jerry Parker's experience where he executed only half the trades he was supposed to. This emphasizes the inherent challenge of overcoming personal instincts and fears, especially when real capital is at stake. The need for accountability in trading, including regular check-ins and feedback from mentors, proves essential for success in maintaining discipline.
Long-term Goals Versus Short-term Pressure
Jerry Parker discusses the importance of having long-term goals in trading, specifically emphasizing capital preservation after achieving substantial early success. He acknowledges that wealth accumulation often shifts the focus to avoiding significant losses, which can become a source of stress for traders. Many investors are driven by immediate performance rather than focusing on the overarching strategy that assures longer-term gains. This psychological challenge highlights the inherent conflict between the desire for consistent returns and the need to stick to a systematic approach.
The Nature of Successful Trading
In the episode, the conversation explores whether successful trading is an innate ability or a skill that can be cultivated over time. Jerry argues that while anyone can learn the rules, adhering to them amidst market volatility is what separates successful traders from others. The podcast also touches on the temptation to alter rules when faced with losses, which often leads to poor decision-making. The discussion reinforces that successful trading requires emotional resilience and the capacity to maintain discipline, even when it goes against one's natural inclinations.
The Role of Trend Following in Investing
Trend following is characterized as a distinctive investment strategy that many investors overlook, despite its potential merits on paper. Jerry shares insights on how this strategy can outperform traditional portfolio setups during market downturns, as it enables short selling and diversification across various asset classes. While the returns may lag during bull markets, the strategy typically shines in periods of market stress. The difficulty lies in investors' tendency to evaluate it against more conventional benchmarks, which can lead to impatience and a lack of commitment to the strategy.
Evolving with a Purpose
Jerry discusses the importance of evolving trading strategies over time to adapt to changing market conditions while staying true to their core tenets. He notes that the shift from shorter-term to longer-term trend following has significantly enhanced performance, demonstrating how systems should be reviewed and updated without compromising their foundational principles. This adaptability ensures that traders can respond to new opportunities or emerging inefficiencies within the market. The episode underscores the necessity of ongoing evaluation and refinement of strategies within a framework that maintains the overall objective.
In this episode, we dive deep into the world of trend following with legendary trader Jerry Parker. We explore key insights from our previous interviews with Jerry on Excess Returns, discussing his experiences as one of the original Turtle Traders and how his approach has evolved over time.
We cover several important topics, including:
- The challenges of sticking to a trading system, even when you're trained to follow it.
- Jerry's goals for his portfolio and how they've shifted from growth to preservation as he's become successful.
- The unique return profile of trend following strategies and why they can be difficult for investors to stick with.
- How Jerry has adapted his strategy over time, moving from shorter-term to longer-term trend following.
- The importance of allowing winning positions to run and Jerry's unconventional approach to position sizing.
- The difficulties in evaluating a trading system and the dangers of making changes based on individual trades.
- Jerry's thoughts on retirement and why he plans to continue trading for as long as possible.
Throughout the episode, we relate Jerry's experiences to our own work in investing and financial planning. We discuss the parallels between trend following and other investment strategies, highlighting the universal challenges of sticking to a system and evolving it appropriately over time.
We also explore broader themes like the nature of retirement in today's world and how to think about saving and investing for the future. This conversation with Jerry Parker offers valuable insights for traders, investors, and anyone interested in the psychology of successful long-term investing.
