There is a small minority who vociferously question trend following’s validity. They believe that prediction is an absolute:

So, in other words, you trade according to a system the signals of which are not associated with whether price will move both in the right direction and to a certain minimum extent after the trader has committed to a prospective entry? Good luck. You’re going to need it.

This is correct. Trend followers can never have knowledge of some minimum extent move after an entry.

How could anyone give a minimum?

The critic’s argument sounds devastating until you examine the assumption underneath it. The assumption is that a trading approach without a minimum predicted move is no approach at all. That assumption is wrong, and it reveals a complete misunderstanding of what makes trading profitable over time. No approach, including prediction-based ones, can guarantee a minimum move after entry. The difference is that prediction-based traders pretend they can. Trend followers do not pretend. They operate from a probability framework instead.

In the book Trend Following the notion that you can predict anything is addressed head on, but a recent discussion post also frames the issue correctly:

Technical Analysis is attacked for what people wish it could do. Trend following like any form of technical analysis is a risk management tool, not a price prediction tool. Once again, this is why [anyone]’s demand for a predictive model using trends is downright silly. There is no such model and that is not inconsistent with the fact that trend following is a valid form of technical analysis.

The framing matters. Trend following is not a failed attempt at prediction. It is a risk management approach that was never designed to predict. Its validity does not depend on whether it can forecast price moves. It depends on whether it produces positive expected value over a large number of trades across many markets. The answer to that question is documented in decades of audited returns from systematic traders. The prediction critique is not a rebuttal of that evidence. It is a category error, applying the wrong standard of evaluation to an approach that was never making the prediction claim.

In discussing the downsides of the prediction mindset, another trader offered:

Although I’m sure there are folks making money by predicting price (perhaps you are one of them), I’ve never actually met one. All the good traders I know use probability instead. Personally I didn’t start turning regular profits until I got rid of the prediction framework. Also, there was a long time where I thought I surely wasn’t predicting price, but in fact I was [attempting to do so]. These things are part of the long and painful growing process [to overcome]. The only way to avoid it…[is to think in terms of a]…probability framework from the beginning.

The Prediction Trap Is Subtle

That last observation deserves particular attention. The trader who stopped predicting did not do so by learning a new technique. They did it by realizing they were already predicting without knowing it, and that stopping was harder than they expected. Prediction is the default framework. It is how most people think about cause and effect, about anticipating what happens next, about what it means to be right. Moving from a prediction framework to a probability framework is not a technical upgrade. It is a fundamental rewiring of how trading decisions are made and evaluated.

A prediction framework asks: will this trade work? A probability framework asks: does this type of trade work over a large enough sample? The first question has no reliable answer. The second question does. The shift from the first to the second is what separates traders who struggle perpetually from those who eventually find consistency. It is also exactly what the TurtleTrader rules were designed to enforce. The rules do not predict. They define the conditions under which a trade is taken and the conditions under which it is exited. Whether any individual trade works is not the question. Whether the system works across hundreds of trades is the question, and that is answerable with historical data and live performance records.

The critic who demands a minimum predicted move before accepting trend following as valid has not escaped the prediction framework. They have made it more explicit. Trend following does not meet that standard because that standard is impossible for any approach to meet honestly. The only approaches that claim to meet it are the ones that are either incorrect about their own predictive ability or that have not faced enough adverse conditions to reveal the limits of their forecasts. More on why prediction is a farce in trading, and more on how the trend following probability framework produces consistent results where prediction-based approaches fail.

Frequently Asked Questions

Is it true that trend following cannot predict minimum price moves after entry?

Yes, and this is not a weakness. No trading approach can reliably predict a minimum price move after entry. The difference is that trend following does not claim to do so. It is a risk management and probability management tool, not a prediction tool. Its validity rests on producing positive expected value over a large sample of trades, which is documented in decades of performance records.

What is the difference between a prediction framework and a probability framework?

A prediction framework asks whether a specific trade will work. A probability framework asks whether a specific type of trade works over a large sample. The first question has no reliable answer. The second is answerable with historical data. Traders operating from a prediction framework evaluate each trade individually and struggle with the inevitable wrong calls. Those operating from a probability framework evaluate the system across many trades and accept individual losses as expected features of a profitable process.

Why do so many traders not realize they are using a prediction framework?

Because prediction is the default mode of human thinking about future events. The trader who sets a price target, who holds a losing position because they believe it will recover, or who exits a winner because it has reached what they consider fair value is predicting, even if they describe their approach in other terms. Recognizing and eliminating the prediction framework is part of the long and painful growing process that precedes consistent profitability.

Is technical analysis a valid form of trading if it cannot predict?

Yes. Technical analysis, including trend following, is a risk management tool, not a price prediction tool. Its validity does not depend on its predictive accuracy. It depends on whether it produces a positive expected value over a sufficient sample of trades. The criticism that it cannot predict is attacking it for something it was never designed to do.

Trend Following Systems
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