Top Traders Unplugged · Sep 30, 2026 · 1h 7m · 53m saved
With Patrick Welton, Founder and CIO of Welton Investment Partners, a physician who began trading professionally for Commodities Corporation in 1989
Patrick Welton has managed outside money for more than three decades. He said the biggest cost investors usually face is their own habit of switching strategies after a run of performance.
Most of the trend-following industry markets itself on its formulas. Welton said formulas rarely persuade anyone, and that what convinces an investor is seeing where the returns actually come from.
"Steady handedness compounds well."
Welton, founder and chief investment officer of Welton Investment Partners, on Top Traders Unplugged, is a physician who was offered a trading contract by Commodities Corporation in the late 1980s, built his firm with his wife and co-founder Annette, and served on a board with Nobel laureate Bill Sharpe for many years.
The full interview is covered here so you can skip it. 67 minutes of audio, 14 minutes of reading.
Here are the 15 principles that matter.
Key Takeaways
The return gap from investors switching on performance is usually their biggest cost, Welton said
Taking outside money is a moral change, not an operational one: the client's goals come first
Some traders' clients lost money three or four times faster than they made it, which pushed the industry to volatility targeting in the early 2000s
Changing what you do in response to marketing feedback is among the most damaging things traders do
Trend returns break down into four components: economic trend, financial carry, information diffusion and feedback loops
In some markets the vast majority of returns are accumulated term structure premiums
Multi-strategy pod shops have not made trend following harder, he said; zero interest rates and narrow spreads did
A rising trend in execution costs is the sign a manager may have hit capacity
Paul Tudor Jones told him big traders must exit when the market lets them, not when they want
1. Medicine, Then Markets
Asked for the turning points in his career, Welton, 65, said people usually ask him three things: why medicine, why trading, and why both.
A cancer lab, an elevator and Commodities Corporation
He moved into medicine in college and won a grant for a medical scientist training program at UCLA, where the first person he met was Annette, later his wife and co-founder.
"So, I've warned young people for years, be very careful who you get into an elevator with." — Patrick Welton
The two traded personally to make ends meet, were noticed while living near Palo Alto, and were introduced to Commodities Corporation.
"If you roll back into the late 1980s, Commodities Corporation could reasonably be thought of as the very first multi-strategy pod shop of traders." — Patrick Welton
He said the firm also developed trading talent, with senior traders mentoring juniors. It offered the couple a trading contract, and from 1989 it allocated them more money each quarter as they hit return targets. He learned from many traders there, including John Henry.
