Oct 30, 2015
On today’s episode of Trend Following Radio Michael Covel
interviews Emil van Essen. Michael first heard of Emil from former
turtle, Lucy Wyatt. The first thing to note is that he is not a
trend following trader. He is a commodity spread trader. Emil has
been a CTA since 1997, but his first trading experience was at the
early age of 12. Emil delivered papers when he was younger and
would take the money and invest in rare coins. The owner of the
coin store happened to be a commodity trader. He helped teach Emil
about trading commodities and even put in trades for him. Emil’s
first trading job was in 1986 at the age of 21.
Michael and Emil start the podcast explaining spread trading. Emil describes trend following as one dimensional whereas spread trading in his view has a multidimensional trading surface because of all the directions a trade can profit rather than if the market only goes up or down. Emil refers to his trading as not systematic but model driven. At the base of his every trade is a model and they can tweak the model accordingly as they see fit–a big distinction compared to trend following.
Emil’s firm is one of the only CTA’s that are negatively correlated to trend followers. He also believes that following rules 100% of the time is a bad idea. “Our brains are far more smarter than computers,” he states. Emil adds, “We need to know not to be emotional about trades but if you don’t adapt to change then you won’t last.” Emil also throws around the controversial word, “prediction.” He says that when he says “predication”, it is actually more about “probability.” He tries to find a method that reliably tells him that something is going to happen more often than not. Emil says, “You try and find an edge. Find consistent behavior patterns that give you a risk adjusted return.”
In this episode of Trend Following Radio: