What is your opinion of trend-following systems? The best thing anyone can do when starting out is to learn how a trend system works. Trading a trend system
for a while will teach a new trader the principle of letting profits run and cutting losses short. If you can just learn
discipline by using a trend-following system, even temporarily, it will increase your odds of being successful as a
trader.
Do you have an opinion about systems sold to the public? I looked at some of these systems a few years ago and found that they generally made too many trades. If a
system trades too frequently, the transaction costs will be too high, a factor that will significantly reduce the
probability of the system working. I think to be viable, a trend-following system has to be medium to longer term.
The more sensitive systems just generate too much commission.
Besides providing a training vehicle for learning good trading habits, do you feel that trend- following systems can provide an effective trading approach? I would advise anyone who develops a system to combine it with their own judgment. In other words, they
should trade half the money on a system and the other half using their own judgment, just in case the system isn't
working.
Is that the way you trade? I used to pay more attention to systems than I do now. Basically, I just focus on my own judgment.
Is that because your own judgment is more reliable, or because systems haven't been working as well as they used to? They haven't worked as well as they used to because there are too many people using them. Whenever too
many people are doing the same thing, the market will go through a period of adjustment.
What are the key factors you focus on in fundamentally evaluating the T-bond market? The economy is definitely the single most important factor. Four other important elements are inflation
expectations, the dollar, the trade balance, and the budget deficit.
