Investing with the Trend: A Rules-based Approach to Money Management

Chapter 17Conclusions

Technical analysis used to be greeted with as much enthusiasm as Jeffrey Skilling addressing the Better Business Bureau and was often referred to as a black art. It still is often called charting, which is not unlike referring to space flight as flying. Fortunately, those times have passed. The following quote from the Reverend Dr. Martin Luther King could easily be applied to a rules-based trend-following investment model, substituting model for man (he).

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

Dr. Martin Luther King

Near the beginning of this book, I stated that this was not a storybook, but a compilation of ideas, concepts, and research from almost 40 years in the markets, primarily as a technical analyst. We started out by uncovering numerous facts that are routinely used in modern finance that simply do not meet the test of rigorous mathematics or logical scrutiny. Many things in finance are truly fiction or terribly flawed. Next we moved into a section that dealt with market facts, these were basically about how markets work and after covering the fiction and flaws, appeared relatively simple but were based on sound principles of logic and reason. A large section of the book introduced research on risk, and hopefully redefined what risk is. Research that used a simple process of filtered waves and time to determine if markets trended ...