From the pits of 19th-century speculation to today’s systematic hedge funds, trend following has remained the ultimate trading edge. Here’s why it works—and why it always will.
For centuries, traders have tried to predict markets—chasing news, studying fundamentals, and searching for a perfect formula to outthink the crowd. Meanwhile, the only strategy that actually worked was the simplest one: Follow the trend.
Nobody wanted to believe it. Trend following felt too passive, too reactive. Human nature prefers action, control, and the illusion of certainty. But markets don’t reward ego. They reward discipline.
The Unspoken Truth of Early Trading
Trend following wasn’t born in a lab. It wasn’t a theory crafted by economists. It was a survival mechanism.
In the 1900s, the most powerful traders—Gould, Patten, Cutten, Livermore—moved markets through insider knowledge, manipulation, and sheer size. The only way smaller traders survived was by recognizing the trend and riding the moves made by the big players.
This wasn’t some hidden secret—it was happening in broad daylight. The best traders knew: When the big money moves, you move with it.
David Ricardo (1818): “Cut short your losses; let your profits run.”
Arthur Cutten (1900s): “My success comes from hanging on while my profits mounted.”
Jesse Livermore (1920s): “The big money is in the main movements, not the fluctuations.”
They weren’t guessing. They weren’t predicting. They were following.
The Birth of Systematic Trend Following
For most of history, traders applied trend following intuitively. But in the early 20th century, the strategy became systematic.
🔹 Dow Theory (1900s): Identified market trends based on price action. 🔹 Richard Wyckoff (1920s): Recognized how “smart money” moved first. 🔹 William Dunnigan (1950s): Created one of the first formalized trend-following systems. 🔹 Richard Donchian (1957): Popularized moving averages and breakout trading.
By the 1950s, trend following wasn’t just a loose idea—it was a rules-based system. Buy breakouts, stay in until the trend ends, cut losers fast.
It worked in commodities. It worked in currencies. It worked in stocks. And it still works today.
Why Trend Following Survives
Markets change, narratives shift, and investors keep making the same emotional mistakes. But trends persist.
That’s why some of the biggest hedge funds today still rely on trend-following models. They don’t need to predict the news, time interest rate cycles, or outsmart the Fed. They just follow price.
Because price already knows.
That’s the secret. That’s the whole game.
Find the trend. Follow it. Manage risk. Ignore the noise.
Do that, and you’ll always have an edge—no matter what century you’re trading in.
How I Approach Trend Following and Risk
It’s easy to read about trend following, but applying it is a different story. Like many, I didn’t start with a systematic approach—I had to build my own.
I was drawn to trend following because of its simplicity, but also because of its brutal honesty. It forces you to remove bias, accept what the market gives you, and respect risk above all else.
For me, risk management is everything. My style isn’t about catching tops and bottoms—it’s about position sizing, cutting losses early, and riding winners as long as the trend allows.
I use a combination of breakouts, moving averages, and relative strength to guide my trades, but the core principle remains the same: I don’t predict—I react.
What works best for me:
✅ Systematic entries and exits – I have clear rules for when I get in and when I get out. No second-guessing. ✅ Sizing appropriately – Knowing when to bet big and when to stay small is half the game. ✅ Accepting that losses are part of the process – Even the best systematic trend following strategies only win around 50% of the time. But when they win, they win big.
The beauty of trend following is that it’s always evolving. Even after years of trading, I’m still refining, still learning. Even experts never stop learning.
Trend following isn’t just a strategy—it’s a mindset. The market doesn’t care about opinions, narratives, or predictions. It moves. And you either move with it or fight against it.
