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104 The Passive and The Active Investor with Harold de Boer of Transtrend – 2of2

“Are you invested in something that, whatever is going to happen, you can say, ‘okay, I’m invested in that for a good reason and I know that’s why i have it’?” - Harold de Boer (Tweet)

Katy Kaminski and I continue our conversation with Harold de Boer, and discuss his philosophy behind pure trend and divergent trading, as well as why Harold believes Transtrend is unique in the managed future space. In this episode, we talk about the benefits of synthetic trading, Harold's advice to a new rising star, and what he is looking forward to going forward.

Thanks for listening and please welcome our guest Harold de Boer.

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In This Episode, You'll Learn:

  • How Harold views pure trend and divergent trading within Transtrend

“Pure trend, somehow the meaning of the term has changed.” - Harold de Boer (Tweet)

  • What pure trend means today in comparison to what it used to mean
  • What it means to Harold to serve his clients best through his trading
  • How trading synthetic markets helps to profit from trends

“I think the ultimate investor should not invest everything in one investment program. You should have different investment styles and you can combine those things.” - Harold de Boer (Tweet)

  • What Harold thinks is unique about Transtrend’s trading model
  • The research projects that inspire Harold right now
  • Why Harold believes it's unrealistic to expect returns without volatility

“This willingness to be ready for the short trend in stocks; synthetics helped in making that possible.” - Harold de Boer (Tweet)

  • The differences between the passive and active investor
  • What excites Harold about 2018
  • The things that scare Harold and keep him up at night
  • Why risk management should be done by anticipation, not by response


Connect with Transtrend:

Visit the Website:

Call Transtrend: +31 10 453 6510

E-Mail Transtrend:

Follow Harold de Boer on Linkedin


“As long as the stock markets keep on rising like they did last year, then people will think we don’t need CTA’s.” - Harold de Boer (Tweet)

Full Transcript

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negative alpha and that’s what we strive to do. 


So, Harold, you mentioned a little bit about risk premia, and I thought we’d turn towards trend. I think that this is something… I know, in the past, I’ve heard you talk a lot about how Transtrend is focused on pure trend, and on divergent trading. So, I thought it would be nice if you could give us a glimpse into that philosophy and how you explain that and how that runs through your investment process and the people on your investment team. 


Pure trend - somehow the meaning of the term has changed. I would say we are a pure trend follower because everything that we do is aimed at capturing trends and doing that as maximally as possible. It doesn’t matter where they are. We look at it from a trend perspective, not from a market perspective.  

We want to be in the oil trend, and this is there and there. We want to be in the trend that is caused by people buying more things on the internet instead of in old-fashioned shops, OK, you can pick it up there, and you can pick it up there. That’s the kinds of trends we are in. Pure trend, nowadays, has come down to: “We do it with a simple trading rule that is available to everyone. Well, we [at Transtrend] have never used one of the available trading rules And then we only apply this rule on the most mainstream markets. That is, what’s nowadays called pure trend 

So, in that sense, we are not pure trend at all anymore because the meaning of pure trend has changed. We have always… 


That’s exactly right, actually, very well put. 


Actually, we started by trading palm oil as one of the first markets, and that is one of the last markets added by the pure trend traders, at least what is nowadays is called pure trend. What this pure trend nowadays really is, is “Can we do it cheaply with more negative alpha – so with lower cost but you do it less well - and then can we, (maybe from outside) get the other markets and add that on top? That doesn’t, of course, function because the way you position yourself in the Ruble (if that is one of the markets that is not in your pure trend), should, of course, be dependent on how large your position in the oil market is. But, if your oil market is in this pure trend cheap thing, and the Ruble is in another portfolio, then these two things are not connected. So, you have, at least one inefficiency there. So, instead of avoiding inefficiency you’re adding inefficiency. 

So, are we pure trend? Yes and no. We thought we were, but then the meaning of the word changed. (Laughter) So we don’t use the words “pure trend” anymore. 


So how about the concept of divergence? This idea that you’re not adding non-trend focused strategies into your portfolio, so not mean reversion, and maybe not some carry, and other issues like that, what’s your view on that and how do you…? 


Well, I like to concentrate on one investment program, on one style, one idea, and to do that optimally. Things get complex if you mingle it with different ideas. I think the ultimate investors should not invest everything in one investment program, so not only long stocks, and in long stocks not only in long value.  

You should have different investment styles, and you can combine those things. But, within every style, that [approach] should be optimized so that you get that beta as efficiently as possible. So, I think we serve our clients best by offering something that is really [focused] on this trend thing - getting into the trend and optimally benefiting from that trend, and do that in as many possible markets, not because we want to trade many markets as possible, but because we want to be in as many different trends as possible and be sizably invested in those different trends. That is something that we are offering.  

We are aware that the performance of a mixed program may look better. But that is something that the ultimate client should do. The ultimate client should combine pure trend, or real trend, or whatever. The complete trend thing, then there’s something else [that is] the complete carry thing and something else that is the complete value thing.  

And then you can, as the ultimate client, make the things that you want. No one is served by something that does a little bit of this, a little bit of that, and a little bit of that, and somebody else will do a little bit of those things too. Because combining these two investment managers is not going to work. If there was only one investment manager, then you should put all these things in there. Luckily, there are many different investment managers. 


So, going down that same line, you just mentioned the markets. I remember many years ago, one of the things that Transtrend has always been well known for is just how many trends they trade and how many markets they trade. That trend has definitely (not to use the word trend too many times here) has really gone into other managers, and other people have been saying some similar things.  

I just wanted to hear if “A” you could give us a little bit of background on how you thought about, say, synthetic markets, and multiple markets; and secondly, what are the new, cool, markets that you’re thinking about? What are some of the trend ideas that you think are really cool these days as opposed to a few years ago? 


Well, the concept of synthetic markets is very simple. Most people are aware but if you look at the portfolio level, traditionally, many of the futures markets around in the world were all expressed in dollars. So you could say, “We have a position here in the euro, and the British pound, and in those days in the d-mark (not in the euro), and the Japanese yen, and in the Aussie dollar. We have a position in copper and in oil, and we have a position in bonds…. But at one side of it was the dollar.  

And if you looked [at it] from a portfolio perspective, there was the dollar in all of your trends. So, if there was a very nice energy trend which… Let’s say, energy markets are really rising together with the dollar. But iff you express your energy in the dollar, then you cannot really benefit from it. So, the very simple thing [to do] is to [ask] why should everything be in dollars?  

Well, one of the first synthetics we did, immediately when we started trading, was the d-mark versus the yen. No one trades this anymore, of course, because the d-mark doesn’t exist anymore. But, at that moment there were no direct futures contracts traded, so we traded in a combined way: combined d-mark versus the dollar with the yen versus the dollar. Then you [combine] those two things and you can trade the d-mark versus the yen, which is (just as well) a normal market that can have a trend as the dollar versus the yen, or the dollar versus the d-mark. Nowadays everyone does the euro, and the euro/yen is now a direct futures contract.  

As it happens, with more of these synthetics that we used to do, [they] ultimately become a market. It did exist already as a market, there just didn’t happen to be a futures market for it. So this was one type of thing that we were doing. Nothing changed.  

The big advantage of it is that we can have a big position in oil markets, long, without necessarily having to have a big short dollar next to it. That means you have more ways of being positioned in different trends without having this big, [single] concentration.  

If you look at it from the top down level and say: “OK, this is commodities, and this is currencies. And in commodities, there is no currency risk….” OK, if you say there is no currency risk, and you believe there is no currency risk, then there will be no currency risk... But I think that if the dollar moves, gold versus dollar tends to move. Not because something in gold happening. So, there’s just currency risk in there too.  

So, this is one of the ways of doing it. Of making sure these things are there. Then, also, the more different things are…  Let’s say, one of the themes that is very popular over the last few months is the yield curve flattening. This is something you can capture; it is a trend. You can create a very simple trade by combining two interest rates - a longer term and a shorter term and we trade that trend. And yes, for the last few months we are in a yield flattening trend. 


So maybe you still are pure trend, because, what you’re describing here (if I understand correctly) is that you’re trying to really hone in on what is the trend that you want to trade? 


Yes, that’s it. So, that’s why we were looking at that, and it’s often… There was a time that we were [focused] somewhat too much [on] just adding markets, and that wasn’t the right way because if another instrument just offers a less efficient way of trading the same trend you better not add it. You better trade larger in the other ways.  

But, if you want to, let’s say, in the crops (of course, that is still where our background is), protein can have a different trend than the energy part of a crop. Cows need protein, and pigs need protein, and chickens need protein. But that trend can really be different from the energy part. So everyone that has a feedlot has a program that says I need so much energy for my cows, and so much protein, and so much of this, and then how to do that. So the protein trend can be different.  

By combining some different crops, you can make a protein trend that is not sensitive to the weather. Because if there’s a drought in the field, the protein-rich crops as well as the less protein-rich crops, both have the same drought. But, the underlying trend [is more what people and farmers want.]  

The farmers are looking for the protein because people ask it from the farmers. But, farmers have to find it. To put it into their animals because animals don’t make protein themselves. It has to be fed to them. So, that trend can be traded with synthetics. So, we use synthetics for that. That’s the way we look at markets.  

What’s happening? Is this something that could become a trend? Maybe it isn’t a trend yet, but this could become a trend. Is there a direct market available for it? Yes. OK, can we trade? Can we trade it large enough? Is there another way we can trade it? No. Can we do it in a synthetic way? If it’s not directly available in the market, then we have to make a synthetic, but we have to combine the synthetic so that it’s able to get the trend.  

We don’t start with markets and see whether there is a trend. No, we want to capture trends, and we use markets to be able to participate in that trend because we, as traders are, in that sense, [people who are very limited.] The only way we can profit from a trend is by trading in the markets. We have no other way of doing so. So, we have to position ourselves in markets, but we can make our own markets in a synthetic way. 


Out of curiosity, when you think about Transtrend, obviously, I accept that you don’t know what everyone else is doing, but I’m sure investors are looking for what’s the differentiating factor about Transtrend? What is the unique thing that you do compared to some of the other great names out there?  

What would you say if someone asked you what’s unique about you? What you explained are things that I really haven’t come across in all my conversations, and in quite a few years in this industry. It’s a different way of thinking of things. 


[Very often it all looks the same]. If you look, for instance, last year, in 2017. If you look at the performance of DTP and you compare it with a trend index, for instance, most of the time it is very much the same – it’s very highly correlated. But every now and then it makes a turn. It really becomes different. 

If you look at the last half of last August, then it was really making a difference, because then the stock market started to come down, especially in the US, and especially banks.  In Europe, more stock markets came down, and DTP seems to be faster in picking up that downtrend, building up shorts, building up really other positions in different markets that typically trend when something in the stock markets is happening. So the program was really [positioned] in different things. And for a period we could almost see that, if the Nasdaq is going up today, then you can be sure that the trend index will be much better than DTP, and if Nasdaq is going down today you can be sure… 

So, in the last half of August and the first half of September there was this very big difference there And after that not anymore.  Because then it was in the second half of September already from the second week of September the stock markets moved up strongly again. So, we were underperforming at that moment. It was just because of this willingness to be ready for the short-trend in stocks, and do that in all kinds of ways 

Synthetics helped in making that possible, by picking up those trends quickly. [And what also played a role was that] It was not all stock markets coming down. In the US it was the banks and the financials that were coming down, but not in others; especially in the IT stocks, surely not; in the technology stocks surely not. If you trade only the broad indices it’s different then when you trade single stocks and sector indices, which we are doing. So, that’s also a way that you can better participate in a changing trend. 


There’s clearly been a lot of return dispersion, even among managers who, I think for most people, think that they’re all trend followers so they must be doing the same thing, but clearly that’s not the case. 


Especially not in the situations when, really, something is happening. So, in the first quarter of 2016, there was also a period where the stock markets came down; a downtrend came from China. Then you see much more of a difference between one CTA and another CTA.  

Around Brexit, you are seeing the same thing. How are CTAs responding to that? One does it differently than the other one. Execution plays an important role in that, things like standard execution that you can do with broker algorithms. OK, you can use those in normal circumstances, it probably doesn’t matter that much. But in extreme circumstances that makes a whole lot of difference whether you have execution especially assigned to do well in that kind of environment like a Brexit environment; like what happened after the Trump election where you get these wild market moves. How are your execution algorithms working with that? The standard broker algorithms don’t cope very well with that. So, you very quickly lose something on it. And that’s exactly the periods that you want to be invested in a trend following CTA because that’s the period when CTAs should do well, especially the trend following CTAs. 


Just to go completely away from all of the technical stuff, on a more basic level (but it might say something also about how you are different), does everyone at Transtrend speak Dutch? 




So, I don’t know if that means that everyone is, or are Dutch. Thinking about that, which is unique, because a lot of firms have put together quite international teams, does that change not only your culture, but also the way that you think about things? 


Maybe it’s not only [the fact that we’re] Dutch, although it helped a littlebit. More important is that we have no one in the team who has worked for another CTA. So, everyone is fresh and original thinkers. The view may not always be good, but at least it’s a different view.  

You have these people that travel from one, to one, to one. We sometimes have investors saying that they have just visited four or five CTAs and everywhere they had the same story and then they come to our office, and they heard a different story. That can happen because it’s different people, really different people. We want people to have original views and look at the market themselves and see what’s really happening.  

[We don’t want people who] read a book and try to program that because we want the people to be thinking. [We want] people that look at it to see what’s happening there, and look at the cows and what they are doing. That’s what you should do and not, “OK, I know the trick, so I’m going to do the same thing there.” That’s not our style.  


So, Harold, I’ve had the pleasure of seeing you speak a few times which I quite enjoyed. I know you also write a lot of white papers and some commentary. I think one of my favorite presentations that you gave was on distribution of returns, and on risk and on uncertainty. If you could give us just a little flavor of some of the topics that you find exciting, or maybe some of the research that you have spent some time using to help communicate your philosophy. We would love to hear a tidbit of that. 


What often happens is that we see some things, and we think, “Hey, this is moving in a different direction, and let’s look at this from another side and see how it works.” So, on the website, then, last week, we wrote a story in which we compared drawdowns versus volatility. The big story is that still many people think that larger volatility leads to larger drawdowns. That is a natural thing in the sense that it’s like speed skating. If you go fast, you can fall hard, but if you climb back up on your feet very fast and quickly then you will get back to the rest and no harm is done. 

If you don’t go fast, you will get more and more behind the rest. Then if you fall and it takes a long time, “Oh, everything hurts,” and when you have finally climbed up you start to skate slowly because it hurts a little bit. Maybe [you say to yourself], “I don’t want to fall again, and something is over there that doesn’t look good, let’s go a little bit slower.” Then, you get behind more and more.  

In trading, it’s the same thing. […] What is normal is that low volatility should not lead to a large drawdown. If low volatility does lead to a large drawdown, then something is fundamentally wrong. There should be speed. Volatility is speed. You shouldn’t fall, of course you should know your technique, but there should be speed. Only that way you can make money. Volatility is no guarantee for return, but is necessary for return.  

That is something that we… All of us, we so much like the idea that lower volatility is better. Can we have the same return with lower volatility? That would be great, [just as,] if I could fly with my hands that would be great too. But, that’s not very feasible that that’s going to happen. Some people tried it in the past, but I think they didn’t survive. So, I think it’s better to be more realistic and think, “OK, if we want to do well, if we want performance, then we should have speed, and we shouldn’t fall, but we should have speed.”  

That’s a way of looking at it, “Hey, how can we do that?” Then many things are needed for that, but it starts with the idea of accepting, “OK, with low speed we’re never going to make it.So with low volatility… The returns we made in 2007 and 2008, yes, they were good, but that was with much higher volatility than we saw in 2011, 2012, 2013. But in those years we had a deep drawdown.  

Many people are so much in this standard thing, “OK volatility means risk, risk means drawdowns, and it’s all one thing.” No, it’s not. Concentrate on: is volatility a bad thing or a good thing? Volatility is a good thing.  

Is risk a good thing or a bad thing? Risk is a very good thing because it’s our only source or return. So, the more risk in the market, the more we prefer it. So, don’t walk away from that. Drawdowns are not such a good thing. So, we better try to avoid those. Instead of calling it all the same thing and you have just one button that you can dial, leverage high, leverage low. That doesn’t work. 


I think, personally, that it’s really key what you’re bringing out there. This notion that people think that low volatility programs are less risky and that volatility equals risk, which it doesn’t. Yet, I’m surprised by the fact that a lot of investors prefer the low volatility products, and therefore a lot of the big managers have gone low vol and have become very big, and obviously, that has certain advantages for them. As certainly some of our other guests have said, it usually doesn’t help the investor. 


There is a very easy way for an investor to get lower volatility. If you want half the volatility, you place half the money on the bank and the other half you give to the manager. It’s much more efficient. Unless you do not trust the bank of course. 


Right, right. The crisis you had to choose carefully when you went to your bank, that’s for sure. Now, I think it’s great that you do these papers. I think it’s great that Katy brought up one of them. Another one I seem to remember, I think it appeared in CTA Intelligence. So, you talk a lot about cows, but I have a feeling that you’re also a secret bird watcher because you wrote about the starlings. I want you to tell that story, a little bit maybe, how you describe what they do in a way that relates pretty much to what we do as trend followers. 


Yeah, not only trend followers but as investors. There’s this whole idea of passive and active investing, especially in the Netherlands. There are a lot of people (even some regulators) that think that passive investing is better. The whole thing is their only proof is “Look, because they do not outperform the index – active investors should outperform the index 

In a world in which you think that there’s not something like market impact, so what people are doing in the market has no impact on what the market is doing, then you could say that makes sense. The problem is the market is completely determined by what people are doing.  

That’s comparable with a flock of birds, the starlings. An individual starling is never going to reach (when he has to go in the winter, he wants to go to the south), he’s never going to find his destination. No single starling has the ability to find or to reach his destination.  

The main thing that all the starlings do is keep equidistance to the bird in front of them, above them, below them, and to the left and right of them. They keep almost equal distance – almost constant distance. That’s the way, and that’s why you see these, above Rome, you see it often these very big groups of starlings that make these great moves, and you would think, “Well, they have a very good ballet teacher that tells them what kind of choreography they have to make.” But no, what they just do is keep on following the other ones by keeping the distance very close.  

That is, in essence, what the passive investors do: [they] do just like the rest and stay with the rest. But, if the birds would only do that, then they also would never find their destination. There has to be something else.  

The other thing is [that there are] a lot of birds that know a little bit. Some birds recognize the stars, others recognize the coastlines, and others recognize buildings. Others […] when they’re born they know something like north and south – somehow they feel it. Others recognize how the sun reflects on the clouds and so on.  

There are a lot of birds that know something. That information is not always worth something because if you recognize the coastline but you’re far away from the coastline, that bird has no information at that moment. But it doesn’t matter because there are a lot of birds know something.  

They’ve done a mathematical study with it, and they found out that if the amount of birds that have valid information every moment is at least as large as the square root of the total number of birds, then they will find their destination. Well, with a hundred starlings it means that you need ten of them to have valid information. That’s too much. Starlings are not equipped enough for that. So with a hundred starlings, they don’t make it.  

But if you have ten thousand starlings only one out of every hundred needs to have valid information. Then they make it. If there’s one million, it’s even better in that only one out of a thousand needs something.  

What are these birds doing? Well, the one that recognized the coastline moves a little bit to the left, and the other ones see, “Hey he’s going that way,” and they follow. They don’t know better, they just follow them. When enough of them have to do it then it works.  

Do these birds want to out-fly the others? Are they going to beat the index, as you would say? No, of course not. But if they didn’t do it, then the whole flock wouldn’t come there.  

An active investor never has tried to beat an index. That’s not a real active investor. There are investors that try to beat an index, but those you should forget. Those are also passive investors. They are just doing like the rest. They get very close to it and do it by moving the market a little bit, and then think, “Look, we have done better.” No, that is not what investing is about.  

Investing is about - if you are investing in stocks – “Do I think that Nokia phones are going to be successful many more years or is it going to be the iPhone? Well, it became the iPhone. If [it was up to] passive investors, they would still have a lot of Nokia in the portfolio and much less Apple. It’s active investors that are needed for that, and they determine where everyone is going. It’s a part of doing something.  

As a trend follower, some people would say, “Well, but you are the worst type of birds because you just fly with the rest. That’s what trend followers are doing. Yeah, in a lot of respect we are but, in some respects, we are not.  

One of the things that we do, for instance, is recognizing [when it has] become too much [and become] one big trend with too much concentration. When you see, for instance, around 2000 there was one big technology check, this IT bubble, or the internet bubble it was called in those years.  

Something like that is recognized, and we know, OK it becomes too much of a risk concentration. So, we get out of that instead of going bigger into it. [The same happened in] 2007. The banks and the whole thing was also one big trend. The banking structure was becoming bigger and bigger and bigger in the indices, so the passive investors were investing more and more in banks, blowing [air into] this one bubble. Well, trend following CTAs like us, who look at their risk concentrations, realized “Hey this is going to be too much of a risk concentration,” so we sized down those positions. In that sense, we are doing something.  

And of course, we are also always looking [to see] if what we are doing fits with what is really happening in the underlying world. So, if our systems constantly sell corn at the wrong moment, then we try to find out what is going wrong here. What’s happening here? Why don’t we get good information from that market? 

When we do things like that, we look at what is fundamentally happening there, and that can lead to some change in the structure of the system, or make another synthetic market to be able to better read the underlying trend. So, then we are looking at, I won’t say the stars, but we’re looking at what’s happening there.  


As we sit here, at the beginning of 2018, what are the opportunities that you see for you as a business, for this as an industry? Are you more or less optimistic than a year ago? 


Last year wasn’t even that good, but things are changing. Trends are becoming more different. You could see it already in the stock markets. It wasn’t one big uptrend. One stock market and another stock market were trading much more in different ways, and it has to do with this whole trend of people being aware that it’s not being controlled by the central bank, or by whatever. No one has control anymore.  

There are more people following something, like the strange hype with bitcoin at this moment, for instance, but that’s typical. People are running behind different ideas again. That, in itself, is a good environment for trend following strategies – such things happening.  

As long as the stock markets keep on rising like they did last year, then everyone will still think we still don’t need CTAs But, if you do see a reaction in that, and that can happen It can happen next year. It can happen in two or three more years, but we have had a period in which they just continuously kept on rising. If that changes, then I think trend following CTAs (especially Transtrend since I know how we are responding to it), we will be able to do well, and things can happen.  

Where will it come from? I think the role of China is very important. This is of growing importance. If you look at the dollar versus other currencies at the moment, it starts by looking at what the dollar is doing versus Renminbi. So, those kinds of thing are important.  

Look how commodities are moving, the base metals, for instance. It’s not waiting until the British start on LME to see what the copper is doing. It happened already in the night in China’s time. So, in that sense, these things are changing. Other things will change as well. The world is not standing still. There are a lot of things happening, and it often will result in trends, and many of those trends could be interesting for trend following CTAs. 


So, maybe we turn it the other direction too because this would be interesting to hear your perspective. What are the things that keep you up at night? What are the things that you worry about, or changes in the industry that you wonder how that would impact?  


Up at night? I see that somehow regulators, over the years, have always been very good in creating the next systemic risk. There’s a passive bubble at the moment. This is also really, especially in Europe, stimulated by regulation. Everyone has to use a value at risk model, for instance. Look at how much money is there that has a value at risk limit on it.  

The value at risk models used are good in normal circumstances but absolutely not good in extreme circumstances. So, if you get a very big move, as a result, the value at risk - VaRs - will go up and, because of that, investment managers will have to liquidate positions, which will make things worse.  

So this value at risk that has become more and more adopted, and is used more and more by all kinds of investors, it has become a systemic risk. There are other types of these things as well. So, it’s dangerous.  

The amount of passive money that is going around, the amount of money that’s flying into a pretty limited number of broker execution strategies is a risk. But there are all kinds of regulations that make it harder to use your own set of strategies because if you use your own set of strategies you have all kinds of compliance issues that make it harder, as we show more and more money goes into this limited amount of broker strategies 

There’s nothing wrong with these strategies as such, but if a hundred different market participants, for completely different reasons, with completely different investment styles are selling the same market, using the same strategy, then, in effect, it’s one big order instead of a hundred different market participants each doing their own thing. That creates a systemic risk again.  

So that’s a thing I said, Well, it may look nice because we haven’t had an extreme event in the last few years, but all kinds of regulations have led to a situation in which there is a lot of hidden systemic risk that can come out when something is really moving. So that is something that, yeah, you have to be very aware of that. 


Very true. What do you think the best question that investors could be asking themselves right now? What should they be asking themselves when they look at their investments? 


The thing is, are they ready for if something goes wrong? Risk management is something that is done by anticipation, not by response. Many people think, “Well, I do feel that the stocks are much too high at this moment. I think it would be wise if I sell something, but I wait until it happens.” But, the more people that are doing that then it doesn’t function anymore.  

So, every investor should constantly be aware and ask “Are the positions that I have right now those positions that I do want to have if this thing that could happen, will happen? If not, then you have to adjust your position before that, and not think that you can do it in that situation. Because, in that situation, given the changes that have been happening in the markets with VaR models and so on, the chances that you can do so in a reasonable way in that situation have become much lower than they used to be. Markets have changed in that way. 


So, Harold, if you had one final thought to leave with an investor or an aspiring CTA or trader, what would you say to them?  


I would say this to any investor: whatever you are invested in, are you invested in something that, whatever is going to happen, you are able to say, “OK I’m invested in that for a good reason and I knew, that’s why I have it.”? Not like, OK, maybe I’m lucky and it does alright.” No. It should be “I have this for this reason and it does what I have it for. That makes investing for an investor also much easier.  

Let’s say, if you are invested because you want to become a millionaire when, let’s say Sven Kramer, who is a very good ice skater, wins a gold medal at the Olympic Games, then you should make a different investment then if you want to make money when the stock markets are rising.  

Your investment should be aimed at what you are looking for. If you are investing in Sven Kramer winning the Olympic Games, then you also know that if he doesn’t win – which can happen, he once chose the wrong lane - then you also know, “OK, I have no reason to be disappointed because I chose to invest in him and if it doesn’t work out then, OK that’s the gamble I took. I invested because I expected him to win. If he doesn’t win, then I don’t make money.” 

That’s what investing is about, are you aiming at the thing that you want, and not I want to make money in every circumstance – that’s not going to happen. Are you aiming at in what circumstance do we expect this one to profit, in what circumstance do we want that thing to profit? If it doesn’t profit in the circumstances that it is expected to profit, then you have a problem. 


Excellent, Harold. On that Olympic theme, on that note, let’s wrap up this fascinating conversation recorded live, here in Miami, as some of you probably heard with a little bit of background noise, from time to time. That’s what happens when you do it live. Harold, thank you, so much, for being on the podcast and for sharing your thoughts and experiences with Katy and me. It is so important that practitioners, like you, come and share these ideas because when ideas become conversations that lead to action, that’s when real change happens. 

To our listeners around the world, let me finish by saying I hope you got a lot of value from today’s conversation and that you enjoyed it as much as Katy and I enjoyed making it for you. If you did, please share these episodes with your friends and colleagues so that the conversation can continue. 

From me, Niels Kaastrup-Larsen and Katy Kaminski, thanks for listening and we look forward to being back with you on the next episode of Top Traders Unplugged. In the meantime, go check out all of the amazing free resources that you can find on the website. 


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Thanks for listening and we’ll see you on the next episode of Top Traders Unplugged.