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Saturday, December 29, 2012

David Harding: A Triumphant Trend Follower


 
LEARN FROM GENERALS OF THE MARKETS - PART 19

 

“…In the last all but 15 years I have probably tested  more than 500 systems or strategies, but only few of them have made it onto my list.”  – Faik Giese

 

David Winton Harding is a brilliant British funds manager, presiding over research at Winton Capital Management.  Earning his first class degree from St. Catharine’s College, University of Cambridge, he was a trainee at Wood Mackenzie; a brokerage firm. 2 years later, he went to Johnson Matthey & Wallace. He also had an experience with Sabre Fund Management (a UK CTA). Later, he co-founded AHL in 1987 which was later named the Man Group. In 1997 he started his own business – Winton Capital Management. Starting out with about two million dollars in that year (1997), he now has about up to twenty-nine billion dollars.  That’s why Winton Capital is one of the largest hedge fund in the world. He’s kindly donated to, and sponsored many education and research programs and organizations.

 

Lessons

There are many lessons that can be learned from David.

 

1.      Never despise the days of your little beginnings. David might be envied for his wealth and consistent success in the markets, but he started as a trainee, then a trader, then a co-founder, then a sole founder and head of research. He started with a few millions and now has many billions. No matter how small your portfolio may be right now, simply focus on successful trading. If you can manage a small account successfully, then you can be entrusted with bigger accounts. If you can’t manage a small portfolio successfully, thinking that, with a big portfolio, you’d become a permanent winner in the markets. Seek ways to become successful first, and then great riches would gradually follow.

 

2.      Get rich slowly (not quickly). Since 1997, Winton Capital has made several hundreds per cent in profits. This is approximately sixteen per cent returns per annum. He’d never made up to sixty per cent per annum. David’s become successful because he was able to make small and consistent profits.  Unfortunately, six hundred per cent is what most traders want to make per year. This can cause huge profits and huge losses (portfolios crashing).

 

3.      David Harding is a consistently triumphant trend follower. You may say he uses different types of systematic trading approaches, with the aid of programming and data research. No matter what strategy he uses, he’s basically a trend follower. He allows profitable positions to ride for as long as possible. Position trading makes a lot of sense for trend following. He uses big pictures and trades long-term. With trend following approaches, he made money in fourteen years and ended only one year negatively (even with that, the loss was highly negligible).  You see, a small monthly or yearly drawdown would allow quick recovery in a favorable market. This is another evidence that trend following is a time-tested and irrefutable trading approach. 

 

4.      Before it can be really said one is conversant with a strategy, one must have traded with it in bull and bear markets, in noisy and quiet markets. Before a strategy can become really dependable, it must be able to makes gains in all market conditions, otherwise, the speculator would need to know when to use it and when not to use it. The optimal market situation for each strategy must be known.

 

5.      You don’t need to be an accurate market forecaster before you can be permanently triumphant. David isn’t a market predictor, yet he’s a market victor. The permanent uncertainty in the markets would forever be our ally. You’d need to know how to handle right and numerous wrong trades and yet be successful.

 

Conclusion: Following the line of the least resistance doesn’t agree with the common trading mindset, since one may even lose over 7 out of 10 trades, and yet show some positivity at the end of the trading year – minimal negativity compensated for by minimal positivity. It’s about 3 out of 10 trades that would make the trader triumphant (as a trend follower). What most people fail to agree with is that, one doesn’t know the trades that could bring positivity. This is a matter of self control, taking trades unemotionally and letting profits take care of themselves. 

 

The article is ended with a quote from David:

 

We know that we know almost nothing. But the “almost nothing” we know isn’t completely nothing, and we only bet on that.”
 
 
Azeez Mustapha
 
Market Analyst, Trading Signals Provider and Coach
 
 
 
NB: If you want to receive permanently free winning Forex trading signals, please send me an email titled: “A Request for Free Trading Signals.”
 
Send the request to: saazalmu@yahoo.com
 
Open an account here: eng.fxclearing.ca/ib/915

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