During tough times in the market, the individual investor is not well served by following the buy-and-hold mentality promulgated by the financial institutions, most mutual funds, and brokerage houses since the early 1950s. The “world of finance” and “Wall Street” have set the stage for investing for the long term in their effort to market themselves and sell investing ideas to an unsuspecting and financially uneducated public. With their big emphasis on diversification and its long-term protection, their confusion between buy and hold and buy and hope, the misinformation continues to pour out of the financial institutions.

Corporate pension plans are being dumped, social security is in the tank, and our financial system is in the midst of a giant restructuring because the stability of the past two decades in the last century has caused prudence, and what used to be called common sense, to be set aside for greater leverage and higher risk. Retirees as well as younger investors are learning the hard way that “investing for the long term” has periods where the performance is poor and that those periods can last a decade or much longer.

My decades of experience have taught me that there are times when one should not participate in the markets and are much better off preserving capital because bear markets can set you back for a long time, and they are especially bad when they happen in your later years. Keep in mind that the closer you get to actually needing your serious money for retirement, the worse the effect of a severe bear market can have on your assets. It is critical to understand the concept of avoiding the bad markets and participating in the good ones. It is never too late to invest intelligently for your future.

This is not a storybook. This book is a collection of almost 40 years of being involved in the markets, sharing some things I have learned and truly believe. You will soon find out that there are sections in the book that contain short concepts on various subjects, even one-liners. You will discover early that sometimes I might seem overly passionate about what I’m saying, but hopefully you will realize that is because I have well-formed opinions and just want to ensure that the message is straightforward and easily understood. It is not only a book on trend following but a source of technical analysis information learned over the past 40 years, with quotes, lists, and a host of tidbits that often seem trite, but are usually true.

Some may notice that I repeat myself in a number of places and think that I am old and slipping. While you may be correct, I often did that because it was too important at that point to provide a reference to where it was first said. I believe it is so much easier to make the point again within the context of the current discussion.

Although the book is ultimately about using trend following in a disciplined model for long-term successful investing, it will take a while to get there. I have spent a lot of time on the preparation for understanding the markets, understanding yourself, and understanding things that just don’t work, before I get into the subject of the book. You can certainly read the book from front to back, but it would be best to review the table of contents and read first the areas that catch your interest. There are two large research projects inside this book. I had originally thought about writing an academic white paper, but the formality of that exercise was unappealing, so this book is where they ended up. An effort to have all charts and data with an ending date of December 31, 2012, was purposely done, even though I have to be totally honest, I don’t know why. People who know me will understand. I also ensure that with each concept I try to show the 20-year results as I think that is a reasonable assumption as to the realistic investment horizon for most people. I have created my own footnote technique because as one gets older the superscript micro type generally used in books just doesn’t cut it, plus I prefer all the footnotes to be in a single location in the appendix instead of at the end of each chapter. Furthermore, I have divided the footnotes among academia (A) (articles, white papers, research, etc.), books (B), and websites (W). And finally, in regard to the layout of the book, I have tried to keep comments about charts and graphics such that they are on the same page or at least on opposing pages. There is nothing more frustrating for me than to read about a chart and not be able to see it.

I apologize for the occasional use of mathematics, in particular, equations. I read once that the inclusion of an equation in a book can greatly reduce its sales. That is a sad commentary, so I have tried to keep them only when I believed they were absolutely necessary. Equations are austere, appearing formal and complicated; however, most of the mathematics herein can be classified as arithmetic. If you find that annoying, again, I apologize.

On occasion I am critical of some things, and downright disdainful of others. There is much in modern finance that so blatantly is mere marketing and virtually void of investment substance that it could actually be considered a hoax. I try to be careful with criticism when the results are robust even though I do not believe in the process. When the results of some type of analysis are flawed in ways such that the rules are so complex, have an inordinate number of equations, or entirely too subjective that one could not possibly prove it wrong, I try to state as much. While I write with some certitude, I am fully aware that if I believe I am correct, it does not mean that others are not correct; it just means that I strongly believe what I’m saying. Please do not be offended from my opinions.

The goals for this book are numerous, but if I had to itemize them they would be:

Understand . . .

• How markets work and how they have worked in the past.
• The host of misinformation that exists in finance and investments.
• The tools of modern finance and their shortcomings.
• That as a human being, you have horrible natural investment tendencies.
• What risk really is.
• That markets trend and why.
• That there are techniques to managing money that reduce risk consistently and offer hope for long-term success.

If I had to nail down a single goal for the book, it would be to provide substantial evidence that there are ways to be successful at investing that are outside the mainstream of Wall Street. Although it will appear my concern is about modern finance, it is actually directed toward the investment management world and its misuse of the tools of modern finance.