Trend Following Technology And Automated Trading
Of all the investment methods, Trend Following has one of the largest followings and a pretty solid track record.
The pioneer of trend following was Rich Dennis, a madcap investor from Chicago who turned a couple hundred bucks into a couple hundred million bucks by watching for well-defined trends. Instead of betting on each price movement, Dennis, and later his group of disciples called “The Turtles”, looked for solid movements that were indicated by breakouts.
Even though this sounds relatively easy, the group of Turtles interviewed for the book, The Complete Turtle Trader, by Michael W. Covel, admitted that it could be, at turns, boring and stressful–two emotions that lead to investment mistakes.
In the book, Dennis adds that technology has made it easier for trend following:
“Given what the computer can do today–compared to what it could do a few years ago, I just can’t see how any human could possibly compete with a well-designed computerized set of systems.”
One of our partners, INO has developed several applications for technical analysis that would help trend following traders. You can use a free analysis to determine possible buy and sell points, for example. You’ll have the report emailed to you. Other tools include educational videos and insights from professional traders.
Another powerful tool that can supplement and even hedge the activities of a trend follower is Automated Trading.
This technology can take positions and end positions when the trader is not following the market.
This lets the trader do things like sleep, let’s say, or hang out with friends and have a family life.
Another advantage is, although technology can help the trader immensely, it can’t edit out totally human emotions. Those emotions (like fear and greed) can cause traders to buy into a trend that is waning and avoiding a trade that is building.
Using advanced Artificial Intelligence to create Automated Trading strategies one step–or one giant leap–beyond. It’s like having a million Richard Dennises finding the best trading trends every minute.
And we expect technology for trend-following traders to only increase.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
