Instruments vs. Strategy

“Should I invest in X?” is a question often heard in the investment world.

Coming from the general public it is an especially strong cry out.

The answer to that question is simple, although not obvious to many.

What you invest in doesn’t matter; it’s the strategy that matters.

Markets are instruments: you can choose the best market and instrument for your purpose, but ultimately it is your strategy for using that market/instrument that determines the outcome.

In this commentary, I curate several excerpts — from Richard Feynman to Paul Samuelson — to create a narrative to illustrate the contrast between fundamental and technical traders.

I also makes a case study of Commodities Corporation – the hedge fund/incubator that was founded and run by some of the biggest trend following heavyweights of our time.

One of the most notable aspects of Commodities Corporation’s success is their pivot from their original fundamental strategy to a trend following strategy.

Though the company is not talked about much today (bought by Goldman Sachs years back), their trend following legacy still permeates the investing world.

In this episode of Trend Following Radio:

  • Defining the exact risks involved in a trading strategy
  • The importance of liquidity: entering and exiting markets with ease
  • What we can learn from the history of Commodities Corporation
  • How the scientific method applies to trading logic
  • How Fundamental Analysis differs from Technical Analysis
  • The origins and basic principles of Trend Following Trading
  • The importance of accepting the risks and committing to your strategy

To begin listening, click play on the video at the top of this page, or below…

Regards,

Michael Covel
for The Daily Reckoning

P.S. I originally posted this episode of Trend Following Radio, right here.