Cullen O. Roche
TREND FOLLOWING—IT SOUNDS SO SIMPLE, DOESN'T IT? As Dennis Gartman of the Gartman Letter often likes to say: “If the chart is moving from the bottom left to the top right, then I like it.” And to the untrained eye, that's all trend following is. It's identifying a trend and riding it. And as the famous saying goes: “The trend is your friend … until it ends.” And that's where trend following adds so much value. Trend following is not just about identifying great investments. It's about using rules and techniques to manage the risks associated with these investments. What appears to be a very simple strategy at first glance is actually a sophisticated, multidimensional, and vital technique utilized by successful investors all over the world.
I should be clear that I am not a pure trend follower. I use a multistrategy approach primarily due to my belief that no two market environments are ever the same and that markets are highly inefficient. What works in one bull market or bear market will not necessarily work in the next bull or bear market. This is why trading requires a great deal of flexibility and an ability to conform and adapt to new environments. At the core of my work are risk management and the establishment of a systematic approach. Trend following has been absolutely vital in helping me develop the foundation of my investment strategies.