Wisdom of Trend Trading

History. Trend followers in the 1970s–80s (Turtle Traders) won by holding weeks–months, ignoring short‑term noise. Conversely, many dot‑com traders (1999–2000) used long‑term narratives to hold collapsing names on an intraday plan—timeframe drift magnified losses.

From Jesse Livermore to Richard Dennis, top operators documented rules and executed them mechanically. In 1987’s crash, traders with explicit sell‑stops survived while “I’ll decide later” approaches froze.

During March 2020, S&P 500’s average true range ballooned 4–5× vs. 2019. Position‑sizing models that scaled down avoided outsized drawdowns; static sizing suffered violent stop‑outs.

In 2013–2015, many “expensive” tech leaders kept trending despite valuation debates; traders who respected price participated, while narrative shorts fought the tape and lost.

Breakout traders since William O’Neil’s CAN SLIM emphasized buying strength after bases complete; premature buys in 2008–09 bear‑market rallies repeatedly failed until March 2009’s reversal established a durable trend.

Long‑Term Capital Management (1998) showcased what happens when models lack hard risk brakes—great until it isn’t.

Paul Tudor Jones famously kept losses small and sized aggressively only with tailwinds. Survivors of 1987, 2000–02, 2008, and 2022 bear markets all cite risk control as the edge.

LTCM (1998) and crowded “Nifty Fifty” names (early 1970s) remind us: consensus giants can falter; independent risk rules beat copy‑trading institutions.

After the dot‑com bust (2000–02), those who conserved cash could buy leaders in 2003–07. Those who “had to be in” lacked capital when it mattered.

In 2016 (Brexit, U.S. election), many expected persistent turmoil; yet trends resumed quickly. Traders who followed price, not forecasts, prospered.

The 2003–07 bull advanced via series of higher lows. Fading every rally underperformed staying with leadership until trend breaks.

In 2008, fully invested portfolios had little flexibility. Cash‑rich funds deployed after March 2009 and captured large upside.

2017’s low‑vol regime lulled markets; Feb 2018’s “Volmageddon” destroyed inverse‑VIX products in hours. Habit is not a hedge.

March 2009 produced a failed breakdown in major indices; the ensuing rally ran for years. Similar dynamics appeared after the 2016 Brexit shock.

From Dow Theory through modern cross‑sectional momentum research (Jegadeesh & Titman), evidence supports trend persistence over 3–12 months.

In 2022, many “obvious supports” in growth indices broke repeatedly. Traders who sized for uncertainty survived; those who assumed certainty did not.

Hedge funds that raised cash in 2008 and 2022 outperformed peers forced to de‑risk at poor prices.

Institutions popularized VWAP to minimize implementation shortfall. Brian Shannon formalized Anchored VWAP for swing and position trading.

General Electric (2017–2018) kept making lower lows despite “cheap” metrics. Knife‑catching without proof of trend change was costly.

Market Wizards interviews repeatedly show individualized playbooks. Copying others’ plays without their risk model leads to mismatches.

During 2009–2010 recovery, improving data surprised to the upside as trends strengthened—classic momentum‑news feedback.

Trading psychologists (e.g., Mark Douglas, Brett Steenbarger) document that process orientation and review (journals, playbooks) correlate with longevity.

Echoing Ed Seykota and the trend‑following canon: “The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses.”