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The volatility was too much for fiduciary investors to endure. While JWH made new highs before the year was out, he did cut the leverage.

He does not find his type of trading stressful. The major stress occurs for investors who don't understand what JWH does. "Every time we have extended bad periods, they wonder if our philosophy no longer works. I always get the question, 'Have the markets changed?' [and the complaint] 'There is too much money in trend following.' I always say they have changed and will continue to do so. That is why we are successful."

But true to his ideology, Henry views everything in the long term. "A methodology based on a valid philosophy will be successful value over the long run. There will be prolonged periods of poor performance, so leverage, if any, must be controlled accordingly."

Henry's philosophy has remained constant through the years—during up years and down years. His view is that the markets are constantly changing and are dynamic. "You must adhere to a philosophy that is based on change, and nothing adapts to change better than following trends in any industry or pursuit."

He says the essence of trend following is changing with the times.

Henry believes that all successful traders are trend followers—even if they say they're not. He feels the question really is "How do you define trends?" not "Are you a trend follower?" Some people define a trend as short-term while others are medium-term or long-term oriented.

MEMORABLE PERIODS

During stock market crashes, managed futures traders have historically shone. Often, they are the only investment category that does well in such periods. This occurred in October 1997 and again in August 1998. JWH is illustrative of this point.

In 1987, the financials and metals program was up 252.4 percent for the year. The fourth quarter was the best quarter JWH ever had. Recalling that period, Henry says he thought he was well-positioned for the crash. JWH was short equity indexes around the globe. Unfortunately, trends in interest rate instruments had them short in that sector. They did well the day of the crash, but on the following day's opening JWH suffered one of its worst days ever. Losses spilled over into currencies.