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Every few decades, the financial industry finds a new “Great God” to worship. Today, it is Artificial Intelligence. The pitch is always the same. They tell you that the old rules do not apply. They claim that high-speed algorithms and machine learning have finally solved the mystery of the markets.

It is a high-tech veneer over a primitive desire for a shortcut. It is a story told by someone trying to sell you something.

The Ghost of Jesse Livermore

The legendary trader Jesse Livermore once said that the markets change, but human nature never changes. That is the 100-year edge. Whether you are trading with a quill pen in 1920 or with a supercomputer in 2026, the underlying drivers remain fear and greed. Algorithms are programmed by humans and fed with human data. They are just as susceptible to the “Batting Average” fallacy as any retail trader.

The danger of AI is that it gives you a false sense of certainty. It feeds your desire for a “sure thing”. But the market is not a math problem to be solved. It is a psychological battlefield. Most people use technology to try to predict the future. They want to be perfect before they start.

Systems Over Status

Trend following uses technology differently. We do not use computers to predict. We use them to execute a rules-based architecture without the interference of human ego. We use the system to survive the 99% of attempts that flame out.

We are not looking for the “secret door” to wealth that requires no discipline. We are looking for the trend. The best traders I know are not posting “alpha” online or arguing about which AI model is superior. They follow the rules. They take the signals. They understand that online validation is a dopamine hit that lasts only five seconds, but a systematic edge lasts a lifetime.

Do not get seduced by the latest digital savior. The “secret” to wealth has not changed. It is not found in a black box or a proprietary indicator. It is found in the discipline to follow a trend, the courage to cut a loss, and the patience to let a winner run.

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How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Subscribe to Trend Following Radio on iTunes

Please enjoy my monologue The Psychology of Persuasion with Michael Covel on Trend Following Radio.

Listen to this episode:

• Listen to this podcast on iTunes. (Please leave a rating!)
• Listen on Spotify.
• Libysn RSS.
• Download as MP3 by right-clicking here and choosing “save as.”
• Free Video.

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In 1998, a hedge fund called Long Term Capital Management (LTCM) nearly brought down the entire global financial system. This was not a group of amateurs or “Big Boy” scammers. The board included Myron Scholes and Robert Merton. These men were Nobel Prize winners. They were the most respected minds in economics. They had the highest IQs in the room and the most complex mathematical models ever created.

They failed because they believed their models were more real than the market. They were focused on the forecast. They thought they had found a shortcut that bypassed risk. They were seduced by a future that had not happened yet.

The Arrogance of the Model

The LTCM disaster is the ultimate proof that brilliance is not a requirement for trading success. In fact, being “too smart” is often a liability. These men were obsessed with “value” and “mean reversion.” They believed that if the market deviated from their models, the market was wrong and they were right. They stayed on the “wrong train” until they ran out of tracks and capital.

They were blinded by their own sophistication. They mistook a “smart model” for a smart process. When the Russian debt crisis hit, their models said a default was impossible. The market said otherwise. While the Nobel laureates were waiting for the market to “return to normal,” the price was telling them to get out.

The Price of Truth

Trend following is the humble alternative to this academic arrogance. We do not try to outsmart the market with equations. We accept that the market promises nothing. We do not care about what “should” happen according to a spreadsheet. We care about what is actually happening on the tape.

The victims of LTCM ignored the math of reality in favor of ego. The lesson is simple. Systems beat stories. Price beats promises. It does not matter how many degrees you have if you cannot follow the price. If you want to survive any market environment, you must stop trying to be the smartest person in the room. You must start being the most disciplined.

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How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Feedback in:

Good evening Michael,

I read your latest email with great interest. You are absolutely correct, as I am reluctant to admit. I have been a financial adviser in the UK for nearly 40 years, and retired 10 years ago. I had my own small firm running collective fund portfolios for wealth clients, and they did OK. I always used active fund managers, and have never used tracker funds. There are seven [name] in the family, so we are a smart bunch. Yes, I have one of those PhDs, and my [name], so we know we are always right.

I am comfortably off, but have never made serious money in the markets. I started buying shares in 1973, so have seen 1974, 1987, the 2000 tech bubble, 2008 credit crunch etc. I bought your book 10 years ago and discarded it as too simplistic. How could such a simple idea possibly work?

I would not call it overconfidence, but intellectual arrogance. I am only just starting to come to terms with the fact that I have been wrong for 40 years. I will read your book again with a more open mind and start from scratch!

Thank you for telling me where I have been going wrong all these years: how could I possibly have be so mistaken?

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Welcome!

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Feedback in:

Hey Michael,

I know you get a lot of emails, but I had to tell you how I laughed at your description of SBF with his flabby man boobs. I’m like come on dude at least try to be respectable, but one look at that guy and I knew he was a fraud.

Ok question. I buy skandisk. It’s up 15% in a few weeks. How do I logically set a stop loss?

Enjoy your podcasts a lot.

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You need a full system, not a partial guessing process.

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Subscribe to Trend Following Radio on iTunes

Please enjoy my monologue F*** Dark Times with Michael Covel on Trend Following Radio.

Listen to this episode:

• Listen to this podcast on iTunes. (Please leave a rating!)
• Listen on Spotify.
• Libysn RSS.
• Download as MP3 by right-clicking here and choosing “save as.”
• Free Video.

Jump in!

Feedback in:

Hello Mr. Covel,

Like you, I wasn’t born into royalty; just the son of a car mechanic and a secretary for a welding supply company. But I had a huge run of luck on the right side of a trend (although I didn’t know it at the time) and became financially independent in 2020-2021 in my early 40s.

My journey into trading is too long to describe here, but Jack Schwager and his Market Wizard series got me to believe that I could make it in the markets and introduced me to characters like Larry Hite and Ed Seykota. And Nassim Taleb (as well as other traders) helped me to better structure my thinking on how to make decisions under conditions of uncertainty. And through Hite’s “The Rule” I found you and your Trend Following book.

I just want to say ‘thank you’ for making such an excellent guide to life. Using primarily outcomes to make decisions rather than theory/”knowledge,” and immediately cutting out what is not working while trying to find and perpetuate things that do work has been a very useful philosophy/strategy for my life.

I just listened to one of your podcasts last night with Ed Seykota, and you mentioned Alan Watts. His “The Wisdom of Insecurity” is in my opinion a truly top notch book, very relevant to trading and letting go and “feeling” one’s way through life, following major trends, rather than trying to control everything. For me, Trend Following is the future way of thinking.

So again, just wanted to say ‘thank you.’ Books like yours have greatly enriched my life.

Sincerely,
Brad J.

Welcome!

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How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.