Mean Reversion vs. Trend Following: Don't Mix Them Up

Two traders can watch the same Bitcoin chart and take opposite trades. One buys the breakout because price is climbing. The other shorts it because price has run too far from its average. Both think they’re being disciplined. One of them is about to get run over.

The difference isn’t skill. It’s which philosophy they picked, and whether it matches what the market is actually doing.

Trend following says: when something is moving, bet it keeps moving. You buy strength, you sell weakness, and you accept that you’ll be wrong most of the time. Richard Dennis built the whole Turtle experiment on this in 1983. He recruited people with no trading background, handed them a rule set, and over the next decade they averaged around 80% a year. His point was blunt — you don’t need talent, you need a system you’ll actually follow.

Mean reversion says the opposite. When...

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