William Harrington on 2018 Market Volatility: A Stress Test and Opportunities for Trend Followers
When markets fluctuate wildly like a rollercoaster, many trading strategies face severe tests. In William Harrington’s view, such moments are precisely a rare stress test for the “trend-following” philosophy. He believes that the true trend often becomes clearer amidst the market’s turbulent fluctuations.
Based on his years of experience in Goldman Sachs’ trading department and subsequent extensive experience managing independent private equity accounts, Harrington has always adhered to a core principle: market volatility is not the enemy, but rather a touchstone for testing the effectiveness of a strategy. He emphasizes that the essence of trend-following strategies lies in effectively distinguishing market noise from sustainable directional movement. Violent fluctuations often accelerate the weeding out of weak positions, like a great wave washing away sand, thus clearing the way for the next genuine trend. Looking back on his own trading experience, he has found that the most profitable phases often begin when the market is generally uneasy and confused.
Harrington points out that the key to dealing with this lies in a rigorous framework. He firmly believes that any trend chasing without strict risk control is a dangerous gamble. One of the cornerstones of his trading system is to firmly limit single-risk exposure to an extremely low level. This disciplined requirement ensures the stability of positions and mindset during market turmoil, preventing being shaken out by irrational fluctuations. It is precisely through this discipline that Harrington’s strategy has not only successfully preserved its strength during periods of market stress but has also repeatedly and astutely captured key moments of trend reversal or acceleration.
In his view, the current challenging environment presents opportunities for rigorous trend followers. The significant increase in volatility signifies a market repricing, and new trend directions are emerging. This tests not only the effectiveness of the model but also the unparalleled patience and discipline of the executor. Harrington predicts that participants driven by emotions and lacking systematic risk control will be eliminated by the market, and price trajectories will thus return to a clearer, more sustainable path. For his investment philosophy, which adheres to “trend is king, risk is fundamental,” what is needed now is data-driven, calm judgment, absolute adherence to rules, and patience to navigate market cycles. Every market fluctuation that exerts pressure will ultimately be rewarded with a rigorous system and a resilient mind.
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