Pod Insights Michael Covel's Trend Following Ep. 1347: Sun Tzu with Michael Covel on Trend Following Radio About this episode Please enjoy my monologue Sun Tzu with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive. --- I’m MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I’m proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show. To start? I’d like to give you a great piece of advice you can use in your life and trading journey… cut your losses! You will find much more about that philosophy here: https://www.trendfollowing.com/trend/ You can watch a free video here: https://www.trendfollowing.com/video/ Can’t get enough of this episode? You can choose from my thousand plus episodes here: https://www.trendfollowing.com/podcast My social media platforms: Twitter: @covel Facebook: @trendfollowing LinkedIn: @covel Instagram: @mikecovel Hope you enjoy my never-ending podcast conversation!
Transcript 0:00 Speaker 00 The classic work, The Art of War by Sun Tzu. Maybe you've read it, maybe you have not read it. You have surely heard about it and you might have a sense of what it's all about. Today, I want to compare and contrast that classic work against my book, Trend Following.
0:21 Speaker 00 Just because there is a different context between The Art of War and Trend Following, doesn't mean there are not similarities. For example, both books, an emphasis on strategy, adaptability, and understanding the environment to achieve success. Sun Tzu believed that the art of war is of vital importance to the state. It is a matter of life and death, a road either to safety or to ruin. Pretty critical stuff, strategy. Well, from a trend following perspective, this is serious discipline too. Both require rigorous adherence to systems as the key to avoiding financial ruin. Both involve high stakes.
1:05 Speaker 00 Sun Tzu for state survival. My work for financial survival. The key, both demand disciplined execution to avoid catastrophic failure. Sun Tzu saw that all war is based on deception. Miss Lee the enemy about your intentions and strengths. I don't advocate deception in Trend Following. Traders must act on price signals, not assumptions about market intentions. Trend followers can very easily deceive themselves, however, by not following rules. So the comparison here is divergent. Sun Tzu actively uses deception against opponents, while my deception, what I share, is passive.
1:50 Speaker 00 It's about avoiding being misled by market narratives. Both, however, exploit misperceptions for advantage. You didn't think there was a connection. There's always a connection to trend following. Every damn interesting thing out there comes back to a certain trend following understanding.
2:11 Speaker 00 Another precept of Sun Tzu. Supreme excellence consists in breaking the enemy's resistance without fighting. The essence, win through strategy, not direct conflict. For example, in trend following, it's about winning through disciplined entries and exits. Not overtrading, no emotional battles with the market. Trend followers win by aligning with trends, not fighting market forces. So both here, in this example, Sun Tzu, trend following, both prioritize efficiency and achieving goals with minimal conflict. Sun Tzu through diplomacy or positioning, and trend following through systematic trading.
2:56 Speaker 00 Another precept. Sun Tzu, know the enemy and know yourself, and you can fight 100 battles without disaster. What's the essence? Self-awareness and understanding opponents are key to success. In the trend following world, it's about understanding your system, which is you, and the market's behavior, the quote "enemy." We as trend followers analyze historical data and look at our own risk tolerance to trade confidently. The comparison here, both are strongly aligned. Both emphasize, Sun Tzu and trend following, preparation through knowledge. Sun Tzu focused on adversaries, while trend following, from my perspective, focuses on
3:38 Speaker 00 market dynamics and personal discipline. Sun Tzu, the leader is the arbiter of the people's fate, the man on whom it depends whether the nation shall be in peace or in peril. What's the essence there? Leadership is pivotal to any outcome. And trend following, the trader, has the role as the ultimate decision-maker. A trend follower's discipline determines financial success or failure. The comparison here, they're aligned. Both see the individual, general or trader, as central to success.
4:15 Speaker 00 Sun Tzu: The moral law causes the people to be in complete accord with their ruler. The essence, unity, and morale are critical for coordinated action.
4:27 Speaker 00 From a trend-following perspective, it's your internal alignment. Trusting your system and acting decisively. Doubt undermines your execution. Very similar comparison. Sun Tzu's moral law aligns teams. The systems, the trend-following world that I exist in, aligns the trader and his actions with strategy. Both require commitment to a guiding principle. Sun Tzu: When the enemy is relaxed, make them toil. When full, starve them. When settled, make them move. The essence exploit the enemy's vulnerabilities through timing. From a trend-following perspective,
5:12 Speaker 00 we're talking about capitalizing on market trends when they emerge and exploiting market momentum rather than fighting it. Again, here, both philosophies, the art of war and trend-following are aligned. They focus on timing and exploiting favorable conditions. Sun Tzu: Through enemy disruption. In my world, through market trends. Yet another one. I love this kind of stuff. I don't know about you, but I love connecting trend-following to everything, to all forms of success, either in the current or historical.
5:51 Speaker 00 From Sun Tzu: In the midst of chaos, there is also opportunity. The essence: Chaos creates openings for the prepared. Come on, trend-following thrives in volatile markets where price swings create opportunities for profits.
6:07 Speaker 00 Chaos is the norm in markets. Now that doesn't mean you're always going to make big money in volatile markets. You might get whipsawed, but in a volatile market, you will cut back. What's the comparison here? Sun Tzu, art of war? Covel, trend following? Both strongly aligned. Both see disorder as a chance to succeed, provided one is prepared. And that preparation, Sun Tzu strategically, in my world systematically. Sun Tzu, if neither the enemy nor yourself, you will succumb in every battle. The essence? Ignorance leads to failure. From a trend following perspective, the traders that don't understand markets
6:52 Speaker 00 or their own risk profiles will lose. Ignorance of market behavior or system rules fatal. The comparison between the two? Once again, aligned. Both, the art of war and trend following, stress that the lack of knowledge guarantees defeat. Sun Tzu, the skillful leader subdues the enemy's troops without any fighting. The essence? Achieve victory through positioning, not combat. And trend following? You want to avoid fighting the market. Align with trends. Use stop losses to exit when your signals hit. The comparison, once again, aligned. Both
7:36 Speaker 00 disciplines. Prioritize strategic positioning over brute force. Sun Tzu, through maneuver. In my world, through disciplined entries and exits. Sun Tzu, speed is the essence of war. And the essence of that? Rapid action prevents prolonged conflict. In the trend following world, that means quick responses to price signals. Trend followers act decisively on breakouts or their exits to capture trends or limit losses. The comparison here? Both aligned. Both value speed. Sun Tzu to outmaneuver enemies. And trend following, to seize opportunities
8:21 Speaker 00 or to protect your downside.
8:25 Speaker 00 Sun Tzu, there is no instance of a country having benefited from prolonged warfare. The essence: long conflicts drain resources and morale. And trend following, overtrading or holding on to losing positions, erodes capital. Trend followers cut losses to avoid prolonged battles. The comparison both are aligned again. Both advocate efficiency. Sun Tzu to preserve state resources. And in my world, protect your trading capital. Sun Tzu, attack him where he is unprepared. Appear where you are not expected.
9:08 Speaker 00 Essence: surprise creates advantage. In my trend following world, that means entering markets at unexpected times. Very early, before a trend might even materialize. And of course, if you trade as a trend following trader, your advantage in the big picture scheme of things is to be there when there are big market surprises. Again, both strategies are aligned. Both rely on unpredictability. Sun Tzu through tactics. And in my world, through a certain sense of market timing. Sun Tzu, the leader who wins, makes many calculations in his temple before the battle is fought.
9:51 Speaker 00 The essence: preparation determines success. In my world, backtesting, risk management, long before you ever trade, this puts you in a position to ensure robustness. The comparison, once again, strongly aligned. Both strategies emphasize planning. Sun Tzu through strategic calculations. My world, through system design and testing. I challenge you out there, as you listen to me make these comparisons. Think about all the different ways that a trend following strategy works across the world. Sports, venture capital, movie financing.
10:35 Speaker 00 And in this case, Sun Tzu. Another one from Sun Tzu: let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt.
10:47 Speaker 00 The essence: Conceal your intentions, strike decisively. In the trend following world, that means proprietary systems and acting swiftly on signals. Secrecy protects your edge. Decisiveness captures trends. Once again, both aligned, both advocate execution, Sun Tzu for surprise, in my world for market advantage. Sun Tzu, the control of a large force is the same principle as the control of a few men. It is merely a question of dividing up their numbers. The essence: Organization scales through structure.
11:29 Speaker 00 In my world, trend following scales across markets and portfolios. A trend following strategy applies uniformly regardless of trade size. Both of these philosophies aligned, once again, both emphasize scalable systems. Sun Tzu for armies, and in my world for trading strategies. Sun Tzu, move not unless you see an advantage, use not your troops unless there is something to be gained. The essence: Act only when benefits are clear. And in my world, that means entering at price signals, which doesn't necessarily mean a trend will be there. But that is how you take advantage of opportunity.
12:16 Speaker 00 Both philosophies strongly aligned, once again, both advocate selective action. Sun Tzu to conserve resources, and in my world to protect capital. Sun Tzu, the clever combatant, looks to the effect of combined energy and does not require too much from individuals. The essence: Leverage collective effort, not individual heroics. In my trend following world, that means relying on the combined energy of rules, not your gut intuition. Success comes from process, not genius. The comparison again, aligned. Both prioritize systems over individual brilliance.
13:00 Speaker 00 Sun Tzu for armies, and in my world for trading rules. Sun Tzu, the use of spies is essential to know the enemy's dispositions. The essence: Intelligence is critical for informed decisions.
13:16 Speaker 00 In my world, the equivalent is market data, price analysis. Trend followers quote "spy on markets through technical indicators to find potential trends." The comparison? Both are aligned, both rely on information. Sun Tzu through espionage, and in my world, through data. And both espionage and data guide strategy. Again, you can see the similarities across these many examples. Discipline, preparation, adaptability, efficiency, knowledge. Now, of course, the context is different. Sun Tzu was taking over the world.
14:00 Speaker 00 And you don't necessarily use a form of deception to be a trend following trader. And when it comes to risk management, yes, Sun Tzu and trend following both require risk management, but of course, they're going to be different. But what's not different? The idea of risk management. Whether you have to preserve your army or preserve your capital, you still have to think the same way. Yes, while the art of war and my book Trend Following share a strategic mindset, they emphasize preparation, adaptability, and efficiency. But of course, they differ in application, warfare versus trading. But so what? That's not the point.
14:43 Speaker 00 The point is to see in the everyday world, trend following in action. Look, I get it. Most of the world is long only. Most of the world just trusts the system to take care of them, to put them in bed at night, to give them a kiss on the lips. And that can work great for a very long time. And then one day, it stops working. So when the merry-go-round stops, when musical chairs stops, do you want to be sitting there with your dick in your hand? Or do you actually want to have a strategy? And that is why I spend the time to do something, like to compare the art of war to trend following.
15:23 Speaker 00 It gets you thinking, it gets you in the mindset, it gets you ready for what's to come. See you again next week.
15:37 Speaker 00 I see a time when those awake will understand how to make money in up, down, and surprise markets. Whether a new trader or experienced, college student or financial advisor, protecting against a crash or just trying to make a lot of money, trend following offers everyone an answer in uncertain times. To get started immediately, send me an email, [email protected] . I will send you the right trend following steps to take along with my free video. But if you want to buy and hold, trust the government and trust Wall Street, this is absolutely not for you.
Previous Ep. 1346: Resilience with Michael Covel on Trend Following Radio Next Ep. 1348: Jerry Parker, Moritz Seibert, Richard Liddle and Gareth Abbot with Michael Covel on Trend Following Radio Page updated November 7, 2026 · transcript and summary are machine-generated
