Book Summary
In Trend Following, Michael W. Covel makes the case for one of investing’s oldest and most counterintuitive strategies: do not predict where markets are going, follow where they have already gone. Trend followers build rules for entering a market when a trend establishes itself, ride it while it lasts, and exit when it reverses, without ever needing a story about why the price moved.
The book’s core claim is that big money is made not by being right most of the time but by structuring trades so that losses are small and winners are allowed to run. Covel profiles legendary trend followers, above all the Turtle Traders, the novices whom Richard Dennis trained in the 1980s to prove that trading skill could be taught, and shows how their systems turned modest win rates into extraordinary long-run returns through position sizing and relentless risk control.
The approach applies across markets, stocks, bonds, currencies, commodities, and it is deliberately mechanical: the rules remove emotion from the decision. Readers of Schwager’s Market Wizards will recognize the same cast of characters from a different angle, but where Schwager interviews traders, Covel builds the argument for a single method and defends it against its critics.
Who is Michael W. Covel?
Michael W. Covel is the author of several books on trend following, including The Complete TurtleTrader, and the host of his long-running podcast on trend following. He runs trendfollowing.com and has spent decades documenting the traders and systems behind the strategy. He is an advocate, not a neutral observer, and the book reads that way: Covel believes in trend following and wants you to believe in it too.
That advocacy is both the book’s energy and its bias. Covel knows this literature cold, and his enthusiasm carries the reader through material that could easily be dry. But readers should know going in that this is a book making a case, not surveying the evidence impartially.
Lessons From Trend Following
The first lesson is that prediction is a trap. Markets are moved by events nobody can reliably foresee, and the traders Covel profiles succeed precisely because they stop trying to forecast and start reacting. A trend follower does not need to know why a market is rising; they need a rule that gets them in, a rule that keeps them in, and a rule that gets them out.
The second lesson is about asymmetry. Trend following systems often lose on more than half their trades, and they make their money because the wins are much larger than the losses. That math only works with strict discipline: cut losses quickly, never average down into a losing position, and let winners run far beyond the point where most investors would take profits.
The third lesson is diversification across markets and timeframes. A single trend can fail, but a system trading dozens of markets at once can survive long stretches when any one market goes sideways. The strategy’s edge, Covel argues, comes from the portfolio of trends, not from any single call.
Criticisms of the Book
The honest criticism of trend following is the drawdown. Trend systems can go years without making money, grinding through choppy, trendless markets while racking up small losses, and most investors, however convinced in theory, abandon the strategy at exactly the wrong time. Covel acknowledges this, but the book’s enthusiasm can underplay how punishing those stretches feel in practice.
There is also a survivorship question. The book leans heavily on the most successful trend followers, and it is fair to ask how many trend following funds failed quietly along the way. And the backtested results Covel cites, however impressive, are not the same as the returns a reader will get implementing a system themselves, with real costs, taxes, and emotions in the way.
Who is This Book For?
This book is for investors who are dissatisfied with buy-and-hold platitudes and want to understand a serious alternative, and for traders who have read New Market Wizards and want to go deeper on one specific method. It is also a useful corrective for anyone who has ever mistaken a confident forecast for an edge.
It is not a how-to manual in the strict sense: Covel explains the philosophy and the history more than he hands you a complete system to trade tomorrow. Readers who want to implement trend following will need further study, and readers who want a balanced survey of investing strategies should read it alongside a strong buy-and-hold book.
Final Thoughts
Trend Following is the clearest introduction to a strategy that has made fortunes and tested the patience of everyone who has tried it. Whether or not you adopt trend following, its central discipline, cut losses, let winners run, follow rules instead of forecasts, is useful to every investor. That alone makes it worth reading.
