Trend Following

Trend Following is systematic trading that follows a set of rules so that decisions are not based on emotions, opinions, gut feelings, or what a TV personality tells you will happen. Trend Following is based on the reality of price in the market. It is not based on fundamentals and does not predict the direction of the market.

Learn more about the different principles of Trend Following trading at Learn Trend Following. Trend Following or systematic trading strategies include these rules that are planned out before executing trades:

• Market - What to buy or sell
• Entry - When to buy or sell
• Position - How much to buy or sell
• Tactics - How to buy or sell
• Stops - When to cut your losses
• Exit - When to exit the trade with a profit

Turtle Story

The story of the Turtles is a successful example of how Trend Following works for anyone that can follow the system rules.

The summarized Turtle Story begins with a difference of opinion by business partners Richard Dennis and William Eckhardt. Richard Dennis believed that traders could be taught and trained while William Eckhardt instead leaned towards the opinion that successful traders were born or relied on natural talent. From Dennis' experience visiting a turtle farm, he stated, "We are going to grow traders just like they grow turtles in Singapore."

They took out ads for applicants in Barron's, the New York Times, and the Wall Street Journal in 1983 and 1984. A handful of applicants were chosen compared to the thousands that applied. The new "Turtles" received two weeks of training and put to work trading with Richard Dennis' money. Those that did not follow the system rules were let go. Those that followed the rules made over $100 million for Richard Dennis by the end of the experiment in early 1988. Richard Dennis proved that traders could be trained, follow a set of rules, and become successful through consistency and discipline. Using a systematic trading system with an edge, any willing trader can be successful by establishing rules and not relying on discretion to execute trades.

The Turtle System Rules PDF can be viewed here for free.

Learn from our Turtle Spreadsheets to get started on your own Trend Following system.