Sugar is one of those markets that can rocket on a whim. Veteran traders will easily recall the years when markets like Sugar or Coffee or Cocoa traded substantially higher or lower - the big trends out of nowhere. Often sparked by an assortment of third world concerns, these markets have a tendency to produce large trends in a short period of time.

Look at sugar now. It has exploded to recent highs, highs not seen in more than a decade. But how could you have taken advantage of a move like this? How could you have been ready for the next world event to shoot sugar to the moon? You need to trade with rules. You need to have a system. You need to be ready, with a market like sugar on your watch list, ready to enter on breakouts as it is making new highs or lows. You have no idea when you enter if it will go to the moon, but you still need to have a method that will get you "in" to be on board so if it does rocket up - you don't miss it.

Take a look at the sugar trend for the last year:

This Sugar move is even more proof of the theorem that trend following exploits "worldwide events". Trend followers had ample time to position in Sugar while it was trading around 8.00 - long before the market blew through 12, 14 or even 18. What technical signal would not have had you squarely into the Sugar trend?

Trend following entry into the Sugar happened long before Brazil began using sugar to make mass quantities of Ethanol. You can argue that the fundamental reason for Sugar's rally is tied to Crude Oil. Brazil wants energy independence, so it began using Sugar to make Ethanol in the fall of 2005. However, the fundamentals didn't matter if you were trading to take advantage of this incredible move. Sugar began moving higher long before the public knew about Brazil's energy policy. Traders who waited on the fundamentals to "explain" the rationale for the Sugar trade missed the initial breakout, and the big profits that resulted.

Why do people have such a hard time just accepting the sugar trend (or any other trend) and just riding it? Why do people feel the need to explain "why" the move happened? One of my readers summed it up nicely:

"I believe that most people prefer to think that a 'business approach to investing' just makes sense - plain and simple. Though if you bring the discussion further, and really delve into what that means, and specifically, how it's reliant upon prediction, then you get a lot of blank stares. People have told me that they might not know the ins and outs of how their money manager is making decisions, but they know he is using 'sound investment principals' and they feel safe with that. When I bring up price being the real-time determinant of value, when I bring up money management and systematic trading decisions, as a clear way to be actively involved in your chance of turning your nest egg into an eagle, I get a lot of negative responses. The feedback I get is that people want to think that you need to be a hard working detective to really dissect these companies, understand the businesses, know the management, read the economy and then make an investment based on these 'facts'. They really would rather have that, and pay for that, and buy into that - then work on themselves and take responsibility. I certainly don't think everyone is that way, but it seems that the majority is."

Where do you fit in the spectrum? Did you need to know why Sugar trended to trade it? Or were you agnostic to the fundamentals and happy to follow the trend?

Michael W. Covel is the founder and President of Trend Following. A researcher of the most successful Trend Following investment managers, he has been in the alternative investments industry consulting on Trend Following to individual traders, hedge funds and banks for ten years. His best selling book, Trend Following: How Great Traders Make Millions in Up or Down Markets, New Expanded Edition (Prentice Hall, November 2005) is a complete and concise guide to trend following. It includes interviews with great trend followers who have won millions if not billions in the market. The trading world has embraced the book with endorsements from Van K. Tharp, John Mauldin, Ed Seykota and many more. Trend Following is now in its fifth printing, and is currently available in a Japanese translation with Chinese, German, French, Korean and Russian translations soon to follow. Teaching and sharing unique insights about Trend Following trading and alternative investments has earned Mr. Covel respect as a rational and logical voice in uncertain times. Mr. Covel also writes for numerous industry publications including Your Trading Edge, Stocks, Futures and Options Magazine and International Petroleum Finance and is consistently quoted and interviewed by a variety of financial publications.

Mr. Covel is also Managing Editor at TurtleTrader.com, the leading Trend Following news and commentary resource since 1996. Thousands of visitors from more than 70 countries as well as hundreds of trading professionals engaged in years of debate and interchange making the site the rich archive of trading information, data and opinion that it continues to be today. TurtleTrader, one of the largest & strongest trading community on the web with over 7.5 million unique visitors since its inception, also functions as a resource center for the Trend Following Educational Course.

Justin Vandergrift is with Chadwick Investments. He can be reached at www.chdwk.com.