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Margin of Safety with Trend Following?

There are no perfects with trend following. The only certainty is uncertainty. What I have found over the last 18 years as a way to give myself a “slight” margin of safety is to buy draw downs of commodity trading advisors who have been around for at least 10 years. As much as I have rules for my own trend following, I have rules in place how to allocate to commodity trading advisors who are having a draw down. Actually right now, many commodity trading advisors who are trend followers are hitting worst draw downs. This is the reality of trend following. There is nothing easy about trend following. For those that sell you the hype and easy money be wary. I live trend following from 5am in the morning till I go to sleep…which is about now 10pm…

Currently the only trend for trend followers is continuing to lose money. I vividly remember 2005 and 2006. That had to be the roughest period. Down 30% and double dipping. However 2007 and 2008 were great. This is what trend following is. Putting up with the aggravation and stumbling into some big trades at times. However the current situation could even get harder or worse. No crystal balls here…however if you want to trade with somewhat of a potential of a margin of safety consider buying draw downs of long existing trend followers….bear in mind it could get worse…The only certainty is uncertainty…

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts, commodity options or forex can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

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