Progress Update 6

    Today I continued my Code Academy Python course and read more of Chapter 2: Great Trend Followers in Michael Covel's book: Trend Following.

    I completed the 4th Python learning module about lists and I'm one coding project away from completing the 5th Python learning module about loops. Despite getting through less modules today, I am now 45% complete with the entire Python course. This can start to slow as I get near the end with all the harder concepts, but I am still aiming to complete the course before my 7-day trial.

    In between coding breaks, I continued reading chapter 2 of Trend Following because I previously skipped to chapter 10 about successful trading systems when I encountered a problem with developing my own trading system and needed help. 

    Since all of chapter 2 is about great trend followers, I learned about a few people who have developed great trading systems to consistently make them money over long periods of time. The people that I learned about today were: Bill Dunn, John W. Henry, and Ed Seykota.

    The important bits of information that I learned about Bill Dunn's strategy that makes him successful is that he cuts his losses, he sticks to his original strategy and has never changed it in 30 years (since this book was published in 2009), he stays in trades on an average of 3.75 years to focus on the larger moves, he constantly reinvests profits back into the fund to compound profits, and he goes short as often as he goes long to not be constantly biased to one side (e.g. "stocks only go up" mentality).

    One important bit of information that I learned about John W. Henry's strategy that makes him successful is that he doesn't focus on external forces (e.g. Fed announcements, company announcements, etc.) instead focuses on price action. This means he doesn't try to predict markets. He as well stays in trades for months and years and only focuses on the bigger moves.

    The important bits of information that I learned about Ed Seykota's strategy that makes him successful is that he focuses on risk management. Michael Covel wrote down several quotes and lessons by Seykota such as: "To avoid whipsaw losses, stop trading", which boils down to a lesson that you have to accept the fact that you will lose. Another good quote related to risk management is: "Risk no more than you can afford to lose and also risk enough so that a win is meaningful." The lesson about this quote is self-explanatory because it's good to cap your losses, but when a risky trade goes your way by a lot, it's not fun to gain too little when you could have put more on the table.

    I learned quite a bit today from the hours I spent coding and reading and expect to accomplish quite a bit tomorrow doing the same thing as well.

-Jamie