One of the greatest traders in history was wrong most of the time. And that's exactly why he made millions.

His name is Ed Seykota. And back in the 1970s, when everyone else was squinting at ticker tape and shouting across trading floors, this MIT grad did something nobody understood. He coded one of the first computerised trend-following systems and let it trade for him.

The result? He turned $5,000 into roughly $15 million over about 12 years. Around 60% a year.

But here's the thing...

He didn't do it by predicting the market. He didn't catch tops. He didn't catch bottoms. He did 4 things that make most traders feel uncomfortable.

1. Ride the trend. Don't fight it.

The trend is your friend. Stop trying to be the genius who calls the exact reversal. Catching a falling knife feels smart. Following a trend feels dumb and obvious. But one of them pays the bills, and it's not the clever one.

2. Cut your losses fast.

Small losses are just the cost of doing business. When the system says you're wrong, you're out. No hoping. No "it'll come back." No averaging down because you've fallen in love with a position. You take the small loss and move on, like ripping off a plaster.

3. Let your winners run.

This is the brutal one. Every instinct in your body wants to grab a small profit and feel safe, then you watch the big move take off without you, like a bus you missed by ten seconds.

Trend following forces you to hold. You only need a few huge winners to pay for all your small losers. That's it. That's the secret. You can be wrong 6 times out of 10 and still get rich, as long as the winners are big and the losers are small.

4. Trade in many markets

Markets are not trending most of the time. The move you're waiting for might show up in crude oil while stocks chop sideways, or in currencies while everything else does nothing.

So if you're only trading one or two markets, you're fishing in a tiny pond and wondering why you're not catching anything.

Spread your bets across uncorrelated markets, and increase your odds of capturing a trend.

Now...

Notice how every single one of those rules fights your emotions?

Riding the trend means ignoring the urge to outsmart it. Cutting losses means swallowing your ego. Letting winners run means resisting the itch to grab and run

Your feelings will sabotage all three. Every time. In the heat of the moment, fear and greed grab the wheel, and they are terrible traders.

That's exactly why you need a system.

Not to predict the future, nobody can do that. But to keep you in the winners and out of the losers long enough for the math to actually work.

Cheers,

Rayner “wrong-and-profitable”

P.S. You can learn more about Trend Following in my book, Trading Systems That Work.