017 – Systematic Trend Following – Jerry Parker

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I’m sure we’ve all heard the story of the Turtle Traders, the legendary trading experiment conducted by Richard Dennis and William Eckhardt to see whether great traders were born or made, producing over $100 million in profits.

Jerry Parker started his trading career in 1983 as one of the original turtle traders, and has been the most successful.

Jerry is now the Chairman and CEO of Chesapeake Capital, a global investment manager that provides investment and portfolio management services to both private and institutional investors worldwide.

He’s been trading a similar style for 30+ years now so has loads of knowledge and experience to share with us.

In this weeks episode Jerry talks about trend following, how to approach wins and losses, dealing with drawdowns, managing correlations in asset classes and how changing market dynamics have impacted trend following and the solution. He also gives us some tips on systematic trading including how he trades without relying on optimal values of the past.

Topics discussed

  • What types of characteristics Dennis and Eckardt were looking for in the Turtle traders program
  • How the Turtles were taught to approach losses
  • Common traits amongst the most successful Turtles
  • The hardest part of trading as a Turtle
  • How Jerry overcame the fear of taking trades
  • The biggest lesson being a Turtle
  • What Jerry did with the Turtles approach after the program ended
  • The impact managing other peoples money can have on trading
  • The key factors that make trend following work
  • Managing correlations between asset classes
  • Long-term vs short-term trend following
  • Dealing with drawdowns
  • How changes market dynamics have impacted trend following and solutions
  • How to diversify to lessen the impact of any one parameter
  • How to trade without relying on optimal values of the past

PLUS questions submitted by listeners:

  • The difficulties in knowing when to adjust strategy parameters
  • Adjusting your system for whipsaws
  • Tips to avoid data mining
  • Do the Turtles systems still work in the todays markets?
  • Are there any markets where the strategies no longer work?
  • Short versus Long trades
  • Overcoming emotions in trading
  • Biggest mistakes and the lessons learnt
  • What todays Turtle program would look like

Resources & Links mentioned in this episode

MarketWizards

Quotes

Top tips from this episode

Loads of great advice from Jerry this episode, here are some of my favourites:

  • Focus on trend following – Jerry has one particular style he trades and his focus is on being the best at that. He’s resisted the urge to diversify into different styles, his diversification is across markets and entry and exit conditions instead and he’s done very well out of specialising in one particular style,
  • Solution to optimisation/data mining – Jerry said “I don’t want to rely on what’s been optimal in the past” and the way he gets around that is to trade lots of entries and exits to remove the desire to find the best. He’s chasing trends and has shorter and longer term methods to getting in and out to ensure he doesn’t miss a trend.
  • The final point which comes up all the time, is Discipline – ‘follow the system’, ‘if it says to enter or exit a trade just do it’. Jerry summed it up nicely in the statement ‘You weren’t wrong if you took a loss, you weren’t right if you made money, you just followed the system’.

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