Richard Donchian, Jesse Livermoore, Ed Seykota, John W. Henry, Richard Dennis, etc.  The list goes on and on.  None of these names will be “new” to you if you’ve been trading for any time at all.  What do all of these traders have in common?  They are, or were, all trend followers.

When you see names like Donchian and Livermoore on board with a style of trading, you really have to give it some serious consideration.  Trend following is nothing new.  In Remiscences of a Stock Operator, Larry Livingston (Jesse Livermoore) often eluded to the fact that when he sold his longs, he automatically got short.  Once his directional opinion changed, he just got back into the market in the opposite direction.  This is one of the defining features of a trend follower.  It’s also the reason that trend following works.  Trend following systems have beat the market for decades now.

My personal income over the last few years has been directly related to my trading performance.  My intraday trading has taken a lot of my time, while my trend following systems have taken almost no time at all.  At the end of each year, my trend following accounts have equaled or beaten my other systems.  When I look at a line chart of the performance, the trend following systems poduce a much smoother line than anything else I do.

Which would you prefer?