Trend following, risk management & long term survival w/ Jon Boorman (stock trader)

ELI5/TLDR

Jon Boorman spent 30 years inside the machine — back office, trading desks, the sell side, a prop desk — before getting laid off in 2004 and rebuilding his whole philosophy from scratch. What he landed on is almost embarrassingly simple: buy stocks that are going up, and get out fast when they stop. No predictions, no shorting, no fundamentals as the trigger. The hard part isn’t the idea, it’s having the temperament to do nothing for long stretches and to keep placing the next trade after a string of losers.

The Full Story

The long apprenticeship

Boorman started as a teenager in mid-1980s Britain. Thatcher was privatising nationalised industries — British Gas, British Telecom — and ordinary people were getting 100 shares at a pound each and flipping them 40% higher on day one. He notes the obvious danger of starting there:

It’s probably not a good thing because it makes you think that it’s easy.

He got a back-office job at Schroders in 1987, traded his own account on the side, and rode straight into the October crash, which wiped him out. The lesson wasn’t subtle: he’d been “flying by the seat of your pants,” no plan, no method, learning “the hardest way of all, by losing money.”

From there, a slow climb. He taught himself spreadsheets (Lotus 1-2-3) and economics at night school to qualify for internal jobs, became an assistant to a portfolio manager, then ran the Far East trading desk at 22. Later he set up a London trading desk for Kemper, moved to the sell side at Lehman, and eventually got a seat on the prop desk — trading the firm’s own money. He describes that as the dream: “I’m managing money and I’ll get paid on my results.”

One observation from his desk years quietly shaped everything later. Some portfolio managers handed him an order and said get me in, now. Others fussed over limit prices and watched the stock drift away for weeks while they filled 10%.

Limit orders limit performance.

The decisive managers, the ones who took the signal and acted, performed better. That stuck.

The reset

Lehman let him go in 2004. He admits it hit him harder than he realised at the time — he’s “very conscientious,” takes losing other people’s money personally. He couldn’t land a hedge-fund seat, so he and his American wife moved to the US and gave themselves a couple of years. (He’s still there.)

That gap became the most important period of his career. He read Van Tharp’s Trade Your Way to Financial Freedom — a title he calls “awful” because it sounds like a get-rich-quick scheme when it’s actually a methodical exercise in figuring out what you genuinely believe about markets, what time frame suits you, and why position sizing matters. He read Covel on trend following and the Market Wizards series, hunting for the common thread among people who’d survived. The thread was always the same: position sizing, risk management, cutting losses.

Then he did something almost monastic. He stripped his charts down, one indicator at a time — stochastics, divergences, the lot — interrogating each one: why a 20-day moving average and not 19 or 22? What’s actually empirical here?

I took every indicator off my chart until I was left with nothing but price. And then that was like the bell ringing — well, there you go, that is actually all you need.

Buy uptrends, manage risk

His whole approach reduces to a sentence: I buy stocks in uptrends and manage risk. The reasoning is a chain of admissions about what nobody can do. Markets aren’t efficient. You can’t predict them. Buy-and-hold gets you maybe 7% a year but only if you can stomach 50%+ drawdowns — and most people can’t. So his answer is a simple rules-based system that captures uptrends already underway and bails before the worst of a downturn.

The screens are blunt: all-time highs, 52-week highs, 50-day highs — new highs on whatever time frame suits you. He’ll layer in trend filters (the 50-day above the 100-day, say) and likes when a daily and weekly signal coincide. He sometimes lets a fundamental theme tip the scales — if two stocks make new highs and one is on William O’Neill’s IBD list of strong-fundamentals names, he’ll take that one for the “extra fuel.” But fundamentals are never the trigger:

I don’t trade companies, I trade stocks. I’m not trading their balance sheet.

The reason is disciplinary. If a good story is your reason to buy, it becomes your reason to hold while you’re down 20% telling yourself it’s “good value.” Price gets him in, sizes the position, and gets him out. Full stop.

Why simple isn’t easy

The recurring paradox: trend following’s greatest virtue is also its curse.

Simple isn’t easy. The things that make it work are the hardest things to do. Every trade feels wrong. You’re buying something when it’s overbought, you’re exiting when it’s oversold.

You get more losing trades than winning ones, but the winners are far bigger than the losers, so the math works overall. The catch is psychological — you have to keep taking entries through losing streaks, and you have to tolerate doing nothing for long stretches. Plenty of people can’t sit still; they tinker, they feel compelled to act, and they break the system.

Long only, and why

Boorman doesn’t short stocks, and his reasoning is refreshingly blunt: he’s never found a way to do it profitably and consistently, and neither have the 25-to-30-year veterans he called for help. Downtrends behave differently from uptrends — markets “rise slowly, they fall very quickly,” short-covering rallies rip 10–30%, takeover bids blow you up. And backtesting shorts is a fantasy because the historic data on borrow restrictions and costs simply doesn’t exist:

It’s very easy to look at the chart and say, oh look, it broke support, that would have been your signal to get short… You just don’t know that you would have been able to do that.

There’s also an asymmetry he’d rather have on his side: a stock can only fall 100%, but it can rise infinitely. So in a bear market he simply holds fewer and fewer positions until he’s mostly in cash, waiting.

Position sizing is the dial you control

He risks half a percent per trade — even 1% felt like too much for comfortable sleep. His framing is precise: you can’t control whether a trade wins or loses, but you can control how much it costs you, and that’s position size.

Entry just determines frequency… It’s only exits that determine whether something is a win or a loss. The position size determines by how much.

A counterintuitive corollary: small accounts should use longer time frames with wider stops (and thus smaller positions), because trading costs eat tiny accounts alive. Most people do the opposite — trade short and often to “build up capital” — which he thinks is backwards.

Surviving the losing stretches

How do you keep trading a system through a flat or losing year without meddling? Boorman is honest that he’s not sure it can be taught — it’s like telling someone to eat less and exercise more. They know. Something else stops them, and only they can find out what. His own trick is to think in units of a thousand trades:

This is just one of those trades, and it almost doesn’t matter whether it’s a win or a loss. It’s just one of the thousand.

If you genuinely believe you’re trading a positive-expectancy system, you keep feeding it identical trades and let the math arrive. Which is why he insists you build rules that suit you — borrow someone else’s and you’ll abandon them the moment things get hard.

His closing note is about goals: make them process-oriented, not outcome-oriented. Don’t target X dollars a day. Stick to the process and the outcome follows.

Key Takeaways

Boorman’s entire method compresses to one line: “I buy stocks in uptrends and manage risk.” Entries and exits are always price-based and objective.
He stripped every indicator off his charts one by one until only price was left — concluding price is the only thing you truly need to read a trend.
He risks ~0.5% of capital per trade. Even 1% felt too high for him to sleep on.
Exits determine whether a trade is a win or loss; position size determines the magnitude; entry only determines how often you trade.
He’s long-only because he’s never found a consistent way to short stocks — and neither, he says, have 25–30 year veterans he consulted.
Shorting can’t be honestly backtested: historic data on borrow restrictions and real costs doesn’t exist, so backtests overstate what was actually executable.
Asymmetry favours the long side: a stock can fall at most 100% but rise infinitely.
Trend following produces more losing trades than winning ones; profitability comes from average wins being far larger than average losses.
The hard part is behavioural — holding through losing streaks and tolerating long periods of doing nothing.
Counterintuitive advice for small accounts: use longer time frames and wider stops (smaller positions), because trading costs disproportionately hurt tiny accounts.
“Limit orders limit performance” — a lesson from watching decisive vs. hesitant portfolio managers on the institutional desk.
He uses fundamentals (e.g. IBD-list membership) only as a tiebreaker for “extra fuel,” never as the trade trigger — because a fundamental entry rationale becomes a fundamental excuse to hold losers.
He thinks in batches of 1,000 trades so no single outcome carries emotional weight.
Make goals process-oriented, not outcome-oriented; never target a fixed daily dollar figure.

Claude’s Take

This is a clean, unhyped articulation of a philosophy that’s easy to state and brutally hard to execute — and Boorman knows it, which is the best thing about him. He doesn’t oversell. He repeatedly says “this works for me” rather than “this is the truth,” and he’s candid that the make-or-break factor is temperament, not technique, and that temperament probably can’t be taught. That honesty is worth more than the strategy details.

The genuinely useful, slightly contrarian bits: the backtesting critique of shorting (you can’t model borrow availability that no longer exists in the data) is a real and underappreciated point; the “small accounts should trade slower, not faster” inversion is good and goes against every gambler’s instinct; and the discipline of separating exits (win/loss) from position size (magnitude) from entries (frequency) is a clean mental model.

What keeps this from an 8: it’s very much a 2015-era trading-podcast conversation, light on hard numbers — no actual track record, no drawdown figures, no proof the long-only stock version delivers what trend following promises. Andreas Clenow, whom Boorman cites approvingly, pointedly refuses to call momentum-on-stocks “trend following,” and that disagreement hints at unsettled ground Boorman waves away. It’s wisdom rather than evidence. As a survival-and-temperament talk it’s excellent; as a validated edge it asks you to take a lot on faith. (A sad footnote for context: Boorman died of cancer in 2018, two years after this aired.)