TREND COMMANDMENTS

A disciple of trend following lays down a few laws—many esoteric—for investing successfully in any market.

By investing using an established trend-following system, we leave all prognostications at the door and make buy-and-sell, long-and-short decisions on price and price alone. Entrepreneur Covel (Trend Following: Learn to Make Millions in Up or Down Markets, 2009, etc.) writes that the secret—around for 200 years or more in one form or another—is to ride profits and cut losses. Based on the simple expectation that when trends hold sway, rising prices tend to continue upward and falling prices tend to continue down, market history suggests these trends persist at least for a time. There will be rude surprises, such as financial meltdowns like 2008 and Black Swan events that mean losses. But on the whole, steady profits or, as the author promises, exceptional returns will accrue to investors in any market who stick with the system. Trend followers won’t be the first in or last out, but if all goes according to plan, they will have a computer-driven numbers matrix that reliably spots price trends up or down and allows for profit making. Readers will have to refer to other Covel books or his TurtleTrader website for details. Here, the intent is to persuade, if not cajole. Pages are packed with sometimes cloying and contradictory inspirational sidebars. Moses would have needed a lot more tablets for all the author’s commandments. Rhetorical overkill, but at its core worth considering.