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Trend Following: How Great Traders Make Millions in Up or Down Markets

by Michael Covel (2004)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

Trend Following: How Great Traders Make Millions in Up or Down Markets

By Michael Covel

Quick Summary

Michael Covel makes the definitive case for trend following, profiling legendary trend followers including Ed Seykota, Bill Dunn, John W. Henry, and Keith Campbell, with hard performance data spanning 30+ years.

Executive Summary

"Trend Following" presents a comprehensive argument for trend following as a superior investment strategy. Covel interviews and profiles dozens of successful trend followers, presents their track records, explains the philosophy behind the approach, and demolishes common myths about market prediction and buy-and-hold investing. The book establishes that trend following works across all markets (stocks, bonds, currencies, commodities) and in all conditions (bull and bear markets alike).

Core Thesis

Trend following is a robust, time-tested strategy that profits by identifying and riding price trends in any direction, across any market. It requires no market prediction, no fundamental analysis, and no economic forecasting -- only the discipline to follow price, cut losses quickly, and let profits run. The strategy has generated consistent returns for over 30 years across all market conditions.

Key Concepts and Frameworks

  1. Price is King -- The market price tells you everything you need to know.
  2. Follow the Trend -- Buy what is going up, sell what is going down.
  3. Cut Losses -- Exit losing positions quickly and without emotion.
  4. Let Profits Run -- Stay with winning positions until the trend reverses.
  5. Trade All Markets -- Diversify across uncorrelated markets for more consistent returns.
  6. Position Sizing -- Risk management through proper trade sizing is paramount.

Conclusion

"Trend Following" is the most comprehensive argument ever assembled for this investment approach. Its combination of trader profiles, performance data, and philosophical framework makes a compelling case that trend following deserves serious consideration as a core investment strategy.