‘Plan the Trade and Trade the Plan’ With Jerry Parker

Jerry Parker, legendary Turtle Trader and Portfolio Manager of the Blueprint Chesapeake Multi-Asset Trend ETF (ticker: TFPN), appeared on Futures with Ben Lichtenstein on the Schwab Network. The pair discussed how the recent leadership of small caps highlights the importance of diversification, the value of unwrapping indexes and trading individual stocks, and how trend following can reduce the risk of psychological sabotage.

Below are some excerpts from the full interview.

Recent Leadership of Small-Caps Highlights Importance of Diversification

skip to 0:30 in the video below

Parker: “I think that’s one of the good lessons for traders, is to embrace the diversification as much as you’re willing to embrace sort of a relative strength in trying to always switch back and forth between the stocks and the markets that seem to be the strongest. Because as soon as you do that, you could see a change in leadership. But I like to embrace the diversification and, you know, sit with some of the things that are lagging and maybe they will catch up and help out.”

Value in Unwrapping the Index & Trading Individual Stocks

skip 1:02 in the video below

Lichtenstein: “If you’re only trading the S&Ps, the e-mini contract, you’re going to force trades that you shouldn’t be in. You’re going to find situations that look like you should be participating. You’re not going to be able to be as patient as you are and precise or detailed in terms of finding those really good opportunities that you would find if you had a basket, for example, a handful, or even more products that you participate in, Jerry.”

Parker: “That’s right. Especially if you’re trend following you could be over-positioned because the S&P – so beneath that S&P hood you’re going to find some stocks in uptrends, some in a downtrend, and you can put on your longs and shorts if you want and have a more balanced approach to the market. And really see what’s happening in the market. Because we did have some major leadership and lack of breadth for quite a while in seeing the smaller stocks not participating. But now you get a better sense of what’s really going on in the market rather than just paying attention to the indexes all the time.”

How Trend Following Reduces Risk of Psychological Sabotage

skip to 4:48 in the video below

Parker: “It’s the psychological part. We’re at war with ourselves. We kind of know probably in general the right thing to do to maximize our trend and our wealth, but then that goes against our human nature of sitting with big winners and allowing the market to fluctuate some.”

Lichtenstein: “We know what to do but oftentimes in fact we do the exact opposite. Right? I used to remind myself that as a child my mom used to say, “Hey go do something!” She was always so busy with five kids running around. That’s how I approached trading. I want to grab the mouse and start clicking or just changing a stock or adjusting a parameter, but ultimately just stand there, do nothing stupid is kind of the way that I used to remind myself. But sticking with that longer-term trend also kind of – just a last thought here, Jerry – that sort of helps you sort of avoid that, right? Over trading, over managing, micromanaging trades and just kind of plan the trade and trade the plan.”

Parker: “Exactly. If you want to be a little shorter term or a little bit longer term, really the key in successful investing from my point of view is a systematic, rules-based approach. So, let’s adopt a few rules like this that go with the trend and take small losses and diversify broadly. And it doesn’t take a real quant or back test to figure out what it’s going to take, the timeframes and the moving average crossovers that it will take to participate in these long-term trends. The rules, systematic approach: that’s the key.”