Quick history of Trend Following

Trend following is a popular trading strategy used by traders to capitalize on the long-term direction of financial markets.

It is based on the idea that markets tend to move in long-term trends, and that traders can profit by identifying and following these trends.

In this article, we will explore the history of trend following trading, including its origins, how it has evolved over the years, and some of the biggest traders who have used this strategy.

Origins of Trend Following Trading

The origins of trend following trading can be traced back to the early 20th century. One of the earliest proponents of this approach was Richard D. Wyckoff, who developed a methodology that involved analyzing the market’s price and volume patterns to identify trends.

He believed that markets tend to move in waves and that traders could profit by riding these waves.

Another early adopter of trend following was Jesse Livermore, a legendary trader who made a fortune in the stock market during the early 20th century.

Livermore used a variety of techniques to identify trends, including reading news headlines and analyzing market data. He also emphasized the importance of risk management and was known for his strict adherence to stop-loss orders.

Evolution of Trend Following Trading

Over the years, trend following trading has evolved significantly. In the 1970s, a group of traders known as the “Turtle Traders” developed a trend following strategy that involved using a set of mechanical rules to identify and trade market trends.

This approach was based on the work of Richard Dennis, who believed that anyone could be taught to trade successfully if they had the right methodology.

The Turtle Traders achieved great success using this approach, and their story was chronicled in the book “The Complete Turtle Trader” by Michael Covel. This book helped to popularize trend following trading among a wider audience and inspired many traders to adopt this approach.

In recent years, trend following trading has continued to evolve. Advances in technology have made it easier for traders to access market data and execute trades quickly.

Additionally, many traders now use algorithms and other advanced techniques to identify and trade trends.

Biggest Traders Using Trend Following

Some of the biggest traders in history have used trend following strategies to achieve great success in the markets. One of the most famous trend followers is Bill Dunn, who founded Dunn Capital Management in 1974.

Dunn’s firm has achieved average annual returns of over 11% using a trend following approach, and it currently manages over $1 billion in assets.

Another successful trend follower is David Harding, who founded Winton Capital Management in 1997.

Winton’s trend following strategies have generated average annual returns of over 11% since its inception, and the firm now manages over $30 billion in assets.

Richard D. Wyckoff was an early advocate of trend following trading. In the early 20th century, he developed a methodology that involved analyzing price and volume patterns to identify trends.

He believed that markets move in waves and that traders could profit by following these waves. His approach was based on the idea that price and volume data reflect the actions of market participants, and that traders can use this information to anticipate market movements.

Jesse Livermore was another early adopter of trend following trading. He made a fortune in the stock market during the early 20th century using a variety of techniques to identify trends, including reading news headlines and analyzing market data.

Livermore was also known for his strict adherence to stop-loss orders, which helped him manage risk and limit losses.

The Turtle Traders were a group of traders who developed a trend following strategy in the 1970s. The approach was based on the work of Richard Dennis, who believed that anyone could be taught to trade successfully if they had the right methodology.

The Turtle Traders used a set of mechanical rules to identify and trade market trends, and achieved great success with this approach. Their story was chronicled in the book “The Complete Turtle Trader” by Michael Covel, which helped to popularize trend following trading among a wider audience.

Today, many traders continue to use the principles and techniques developed by the Turtle Traders in their own trading strategies.

Trend Following for success

Trend following trading has a long and storied history, with roots dating back to the early 20th century.

Over the years, this approach has evolved significantly, with traders developing new techniques and strategies to identify and trade market trends.

Today, trend following remains a popular strategy among traders and investors, and it continues to be used by some of the most successful traders in the world.