Join 10,000+ savvy traders that get Michael's exclusive insights & podcast episodes.

as seen on:

Hit The !@#$ Home Run!

Some companies, and individuals, stress [focus on] the short-term performance of trend followers. They look at one month’s performance, see a down month, and panic. They have complete ignorance of the long-term objective–big money. How bad can it get? I have seen trend following traders make 100 percent in a year followed by a year where they lost 5 percent. That 5 percent loss causes some critics to not see the 100 percent number. That is insane thinking. Just like a baseball player’s batting average can have short-term up or down streaks over the course of a season, trend followers have streaks. Trend following performance will deviate from averages, but over time there is remarkable consistency when it comes to putting up big returns—as long as unpredictable home runs are allowed to happen naturally and unforced. The leading thinkers across varied fields, including insurance, casino gambling, and investing, all emphasize the same point. It’s the Babe Ruth effect: Even though Ruth struck out a lot, he was one of baseball’s greatest hitters. The home runs made up for his strikeouts. A trend follower coaching a baseball team would approach it like the former manager of the Baltimore Orioles. Earl Weaver designed his offenses to maximize the chance of a three-run homer. Weaver did not bunt or want guys who slapped singles. He wanted guys who hit big home runs. Trading is a waiting game. You sit, you wait, and you make a lot of money all at once. Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between.

Note: From my book Trend Commandments. Shout to Michael Mauboussin.


Tagged with: , , , , , , ,
Posted in Statistical Thinking
Free Market Wizard Video!

Receive FREE expert trader video now!

Covel Books & Film
Massive Performance

Trend following performance numbers.

Trend Trading Systems

Pricing for trend following systems. 1000s of clients across 70+ countries.

Live Trend Following

Michael Covel's live events.

Trend Following Podcast

Michael Covel's podcast. 3M+ listens; 400+ episodes: iTunes & Android.


Free Market Wizard Video!

Receive FREE expert trader video now!

Online Payments


Regular guy makes Trend Following fortune. His free video lesson: Watch It Now.