Trendinvestor Evolution - Phase One

Ceri Shepherd

12/5/2021 2 min read

Trendinvestor has really gone through 3 phases since it was started in January 1995.

This was the original "Raw" system. I suspected from the literally thousands of hours of work that it would work well, and it did. Also very lucky to be starting Trendinvestor at the start of the "Tech Bull Market" which was a powerful Bull market that lasted from 1994 to 2000, we rode this whole trend. 

Had a very difficult time in August 1998 with the Russian Bond default leading to the LTCM implosion, but our system told us to sit tight, and the market soon recovered, and then rose to new heights.

On 26/12/2000 so "Boxing Day" the system gave me a signal, so TRADE TWO, to get out of our LONG position and go SHORT which i did, (the first trade the system ever gave was to go LONG the market in the first place!). 

I then rode the Tech bear market all the way down until 30/04/2003. When the system gave me TRADE THREE to cover the short position and go LONG again which i did.

Then on 29/02/2008 my system gave me TRADE FOUR to close the LONG position and go SHORT, i rode the Great Financial Crash until 22/06/2009 when i covered my SHORT position and went LONG once again TRADE FIVE.

So far, so good BUT many lessons learned and definitely room for a phase two system, in particular

The large corrections that are part of any primary trend were hurting, it really is a case of two steps forward and one step back?

Eventually one of these major corrections morphs into the primary trend change at this point instead of regaining my correction losses as the primary trend reasserts, i now had to capitalise the actual loss, this hurt.

I naively thought that shorting would be similar to going long the market. In many ways it is actually easier as the market declines far faster than it rises, so if you are short at the correct time,the money made comes thick and fast, but you are now at the mercy of the inevitable bear market rallies which are normally very ferocious.

Again one of these bear market rallies will eventually morph into the start of a new Bull market, this always leads to capitalizing a severe loss, this was acceptable going into the 30/04/2003 trend change, but not acceptable to me going into the 22/06/2009 trend change.

I will discuss in the next blogs how i feel i have solved these problems or at least largely mitigated the negative consequences.
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