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Trend Following Debate

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?

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.

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.

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