Trend Following 101 With Jerry Parker & Stock Market TV

Jerry Parker, legendary Turtle Trader and Portfolio Manager of the Blueprint Chesapeake Multi-Asset Trend ETF (ticker: TFPN), was the featured guest on Stock Market TV’s The Morning Show. In a conversation with JC Parets, Steve Strazza, and Sean McLaughlin, Parker discussed the original Turtle Trading experiment and how trend following has changed since he began nearly 40 years ago.

Below are some excerpts from the full interview.

Trend Following’s Roots of Simplicity & Repeatability

skip to 40:46 in the video below

Strazza: “So much of what you’re saying speaks to a simple, yet thoughtful and very sensible strategy. Why do you think so many people make investing so hard or complicated?”

Parker: “Well, for me, I don’t see investing outside of pretty much what I do: the rules, you know, the take small losses, let profits run. I think it is hard for people to take small losses.

I think it’s a huge mistake when people don’t diversify maximally. With a stock account even you can do some stocks and bonds, and maybe some commodity ETFs and some currency ETFs. Put some shorts on. Oh for God’s sake, that’s really an important thing. You’ve got to have shorts. We trade so many equities, and we have a healthy short. There’s just a lot of stocks in downtrends, especially now – and some in uptrends.

So, letting profits run. Everyone you ever talk to about trading, regardless of how much experience, they all, we always get out of our profits too quickly. It’s just what we do. We just cannot stand giving back all of this money that we’ve worried about for so long. So, try to have an approach and follow the rules that you at least stay in at least as long as your rules say you should. But that I think is really the key, that people are shocked how far some of these trends can go.”

The Rules Can Be Easy, But Following Them Can Be Hard

skip to 49:40 in the video below

McLaughlin: “This speaks to one of the greatest quotes that Richard Dennis every had. And I’m paraphrasing here, I don’t know exactly how he said it. But he had once said you could publish my trading rules on the front page of The Wall Street Journal, and I guarantee you very few people out there would have the same positive results that I’ve had.

And the reason why that is true is what you’re talking about with the winners.

The hardest trade for any trend follower to hold is that trade that you get into that starts ripping in your direction right away. Now, that sounds like a good thing, but so many traders who, especially with this style of trading where you have a high loss rate, right? You’re losing far more than you’re winning. And when you get that big winner right away. Every bone in your body wants to take that profit because you just sat through 12 losers in a row, right? So you want to take that winner and take it off, book that profit. But those are the trades that you have hold. And those trades are so hard. And that’s why the average person can’t succeed with this style of trading, because they can’t sit on their hands and let a good thing go.”

Parker: “That’s right. And I think that was the original thing that Rich was getting at, that you can’t do it even though I can give you the rules. It’s just so hard to do. And the Turtles were told, ‘Here are the rules, here’s the money. If you lose money, here’s more money maybe if you’re doing the right thing. And the bottom line is just do the right trades.’ Totally pretend environment, and we struggled to do it with all that encouragement and all that mentoring.

However, I think now it’s also taken on a new meaning. When I mention this to people, they not only maybe not want to do the trades, be able to do them, they will argue with me: ‘No you’re wrong. That’s now how to trade. There are better ways to trade. You don’t have to do that.’ And I’m just like, ‘OK.’ So I think there’s more disagreement ton those good rules than there ever has been before – not just they’re hard to do.”