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Drawdowns, Human Emotion and Wanting to Know

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Hi Michael,

I really enjoy your podcast and thank you for doing it. You are spot on and have added a lot of value to my thinking and challenged limiting mindsets I wasn’t even aware I had.

It would be really helpful if you talked about drawdowns and your “process” for getting through them and overcoming the standard human emotions they generate. Assuming someone is doing everything perfectly in their trend following execution (proper position sizing, diversified, ignoring the news, not looking at charts, using risk capital, etc.), do you have a process for getting through a drawdown when time marches on so slowly and our impulses are now now now?

Let’s say you believe trend following works how do you keep yourself sane and unemotional during difficult stretches. Do you have a process you use?

Thank you!

Kind Regards,
[Name]

Have you listened to all of my Basso, Faulkner and Seykota podcast episodes?

All of the psych pros across my podcast, i.e. Odean, Kahneman, Statman, Ariely, etc.? That’s just a few.

Literally dozens there.

My books?

No secrets.

Note: For those that want even more hands on instruction.

Posted in Trend Following

Trend Following Learning Can Be Fun

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Hello Michael,

I just wanted to send you a note of thanks. Several months ago, I began trading a significant portion of my money according to a futures-based long term trend following system. This followed about 12 month’s worth of nights and weekends reading about trend following, listening to your podcasts, learning to program in C#, making sense of futures, developing/backesting trading models, finding a broker that provided access to the markets I needed, and finally, going live. The result is a system that trades 33 contracts that are diversified across nearly every major asset class and geography. I relied heavily on your books, podcast and blog. Thank you! I’m sure I could have shortened the learning period by signing up for your flagship product but I was having lots of fun doing it on my own. Perhaps one day you will allow me to buy you a beer (or a green tea) in appreciation.

Take care,
Greg

p.s. I thought you’d like the following article about my Portland Trail Blazers that highlights the philosophy of putting process above results. Seems like it could just as easily be an article on trend following. Love the money quote: “What you accept in victory, you must accept in defeat.”

Very cool! Thanks.

Michael Covel

Michael Covel

Posted in Trend Following

Ep. 445: Parag Khanna Interview with Michael Covel on Trend Following Radio

Parag Khanna

Parag Khanna

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Michael Covel interviews Parag Khanna. Parag is an international relations expert, a CNN Global Contributor and Senior Research Fellow at the National University of Singapore. He is also the Managing Partner of Hybrid Reality, a geostrategic advisory firm, and Co-Founder & CEO of Factotum. Parag’s new book, “Connectography: Mapping the Future of Global Civilization” recently came across Michael’s desk. The concept of connectivity does not just relate to mobile phones and Skype. There is a very physical and tangible evolution of connectivity that can be boiled down into three categories; transportation, energies and communications.

Michael and Parag start the podcast off touching on what connectivity is and then dive into the relationship between cities and states. Parag says that there is not one single successful state that is not built upon the stability of their successful cities. We have more mega and viable cities than states in the world. Cities are the drivers of growth. More mayors are sitting heads of states or presidents nowadays than any other time in history and think of themselves as CEO’s rather than politicians.

Next, Parag elaborates on supply chains. The diversity of products available today is truly global. A product can have digital design from Silicon Valley, assembly in China, and a call center for product customer support in Vietnam. As a business, the combination of infrastructure investment and connecting through supply chains to global markets makes you a real player in the economy. Michael brings up the economical impact that globalization has made, in particular to taxes. Apple is working with Ireland to keep their investments outside the U.S. More and more companies are realizing that they can operate over “the cloud.” Markets are everywhere and sales are everywhere so investments should be able to be everywhere as well. American politicians have been counter productive in trying to capture taxes from some of the biggest companies in America.

Michael brings the conversation back to China and their infrastructure. China has made a global plan to help counties boost their infrastructure. They are spending their own money to help gain trust and also smooth the flow of goods in and out of developing countries by building railways, airports and shipping ports. Most of the world trade growth is happening across the Indian Ocean because of the Chinese.

Next, Michael brings up country borders and the reservations citizens may have about immigrants. No country has gained more from accepting immigrants into their society than America Parag argues. Parag says that unfortunately people are acting more with their hearts rather than acting on the data. There are far more benefits to welcoming immigrants into societies as opposed to shutting them out. People talk about globalization doing us wrong. It is not. It is political governments that are failing. Policies in politics are the problem.

Michael and Parag finish up discussing the booming rise of Dubai, and how the city is a perfect example of infrastructure growing a city. Dubai has thought strategically about all their expansion, from their roads to their buildings to their education system. It’s a place that represents a leap in quality of life for people who are on the move and doing different things.

In this episode of Trend Following Radio:

  • Supply chains
  • Connectivity
  • Cities vs. State
  • Chinese infrastructure growth
  • Trade
  • Trust among China’s neighbors
  • Territory borders
  • Globalization
  • Winners and losers in the 21st century
  • The idea of “not in my backyard”
  • Growth of Dubai

“The truth is that winners and losers in the 21st century will be determined by old versus new. Not any of these ideological things. Who has newer and better stuff and is able to maximize the utility of that stuff to improve the welfare of their population.” – Parag Khanna

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Posted in Trend Following

“Big thanks for sharing such insightful interviews for free…”

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Hi Michael,

Just want to drop you a quick note to tell you that I enjoyed listening to your last podcast with Simon Black. Some of his thoughts resonate with mine – such as being responsible for oneself and not “hope that the government will make it right”. Big thanks for sharing such insightful interviews for free. It’s inspiring.

Cheers mate.

Thanks,
[Name]

Posted in Trend Following

“Mainstream is for sellouts…”

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Your work is great, Mike. Keep doing what you do, and how you do it. The fact that you keep one foot in obscurity, staying just under the radar – it’s like the old days of college radio. Mainstream is for sellouts.

Best,
[Name]

Nice phrasing.

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“What does the visualization do?”

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Hi,

Are all trend followers use spreadsheet alone to trade? Or they also use charts for visualization? I am having a hard time trading using spreadsheet alone and I tend to see a chart. It provides the visualization I need.

Thank you

Best Regards,
[Name]

What does the visualization do?

Are your trading decisions based on the price or visualization of a chart?

It better be price.

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Posted in Trading 101, Trend Following

Trading Food for Thought: April 26th Edition

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Posted in Economics, Psychology, Risk Management, Trading 101, Trend Following
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