Key Takeaways
- • A 25+ year trend follower credits Ed Seykota's mentorship and Michael Covel's "Trend Following" methodology as foundational to his investment success, successfully navigating major market dislocations including the 1987 crash, 2000-2003 dot-com decline, 2007 financial crisis, and 2020 COVID drawdown.
- • The investor's primary concern at this stage is portfolio concentration risk and gap risk—the fear of overnight catastrophic equity declines (cited: 20% Dow decline, worse Nasdaq moves) and the psychological challenge of maintaining discipline during chaotic geopolitical conditions rather than trend-following mechanics themselves.
- • The investor combines trend following principles with William O'Neil's CANSLIM methodology for growth, indicating a hybrid approach that balances momentum-based systematic trading with technical analysis rather than pure trend following.
- • Optimal F position sizing methodology was rejected despite mathematical appeal due to perceived over-leverage risk ("plunging more than investing"), revealing practitioner concerns about risk concentration and emotional capital preservation at advanced investor age.
- • The investor's past performance includes successful evasion of four major market crises through disciplined trend following, though recent equity reductions appear driven by loss aversion and portfolio risk management rather than pure algorithmic signal adherence.
Summary
A seasoned trend-following investor with over 25 years of experience has publicly credited Ed Seykota and Michael Covel's trend-following framework as instrumental to his investment success and risk management approach. The investor disclosed that he read Covel's foundational text "Trend Following" on Seykota's recommendation early in his career, later acquiring "Trend Commandments" to reinforce discipline and confidence in systematic momentum strategies.
The investor's track record demonstrates successful risk mitigation across multiple market regimes: he avoided significant losses during the October 1987 crash, the 2000-2003 dot-com collapse, the 2007 financial crisis, and the 2020 COVID-related equity decline. However, his current constraint on achieving "greatness" reflects not a failure of trend-following methodology but rather heightened loss aversion and gap-risk concerns—specifically the fear of market gaps overnight (citing potential 20% Dow declines and worse Nasdaq performance) and the inability to execute protective measures during chaotic geopolitical conditions.
The investor's recent portfolio adjustments—reducing or exiting equities—have been driven by personal loss experience rather than pure trend-following signals, indicating an emotional component overriding systematic rules. His current strategy blends Covel's trend-following principles with William O'Neil's CANSLIM technical analysis framework for growth, representing a hybrid approach rather than pure systematic trading.
Notably, the investor experimented with Optimal F position sizing but abandoned the methodology due to discomfort with leverage levels, describing the approach as "plunging more than investing" despite appreciating its mathematical rigor. This reveals a practitioner-level concern about behavioral capital preservation and portfolio stress tolerance at an advanced stage of career.
The investor's engagement with foundational risk literature—including Nassim Taleb on black swan events and classical market psychology texts—reflects the intellectual framework underpinning his approach to reconciling systematic trend-following rules with age-appropriate risk management and geopolitical uncertainty.
The investor's track record demonstrates successful risk mitigation across multiple market regimes: he avoided significant losses during the October 1987 crash, the 2000-2003 dot-com collapse, the 2007 financial crisis, and the 2020 COVID-related equity decline. However, his current constraint on achieving "greatness" reflects not a failure of trend-following methodology but rather heightened loss aversion and gap-risk concerns—specifically the fear of market gaps overnight (citing potential 20% Dow declines and worse Nasdaq performance) and the inability to execute protective measures during chaotic geopolitical conditions.
The investor's recent portfolio adjustments—reducing or exiting equities—have been driven by personal loss experience rather than pure trend-following signals, indicating an emotional component overriding systematic rules. His current strategy blends Covel's trend-following principles with William O'Neil's CANSLIM technical analysis framework for growth, representing a hybrid approach rather than pure systematic trading.
Notably, the investor experimented with Optimal F position sizing but abandoned the methodology due to discomfort with leverage levels, describing the approach as "plunging more than investing" despite appreciating its mathematical rigor. This reveals a practitioner-level concern about behavioral capital preservation and portfolio stress tolerance at an advanced stage of career.
The investor's engagement with foundational risk literature—including Nassim Taleb on black swan events and classical market psychology texts—reflects the intellectual framework underpinning his approach to reconciling systematic trend-following rules with age-appropriate risk management and geopolitical uncertainty.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.