The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk

CHAPTER 3

Why Trend Following?

You have all kinds of ways to make money as well as lose it. Many have tried the buy-and-hold (or buy-and-pray) method of stock market investing or real estate and realized it is not the way.

Trend following is natural and not that complicated. However, complicated and easy is a misnomer. Trend following probably has to be one of the hardest and easiest things to do because of our emotional baggage.

Markets can only do several things.

Markets only go up, down, or sideways.

Trend following entails following the markets when they go up as well as following them when markets go down!

When you trade with a well-thought-out plan, you will not take out a large percentage of your business day if you decide to trade daily bars. You might only spend between 30—60 minutes a day as I do when I put on my trades. It is your choice to sit in front of a screen and day trade (which is a definite possibility) or to download daily data and determine what action you need to take, if at all. You can trade stocks, forex, or commodities. The same principles apply to all.

It is that simple! But it is not simple due to our mental baggage such as fear, greed, and ego.

Too many times we try to make simple things more complicated! There are those who think simple means unsophisticated or impossible to generate money. They are very wrong and track records going back decades from many trend followers prove them wrong. The key to success or compounding money over time is the ability ...