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Ep. 497: David Stockman with Michael Covel on Trend Following Radio

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David Stockman is on the podcast today for his second appearance. He is a former United States congressman, who also served as the Director of The Office of Management and Budget under president Ronald Reagan. His books include, “The Great Deformation”, and “Trumped: A Nation on the Brink of Ruin… And How to Bring it Back”.

Michael and David start off discussing the recent news of Larry Summers suggesting that the Fed should start buying common stocks. David says that this is an act of sheer desperation and that any economist, 20 years ago, would have never come up with such an idea. What has happened is that policy makers have been led into a dead end path. “Madness” is how David describes the Fed right now. The mentality people have today, with Janet Yellen, is that intervention is necessary and without it, the whole system will fall apart. This mentality was not present prior to the year 2000 or maybe even 2008. Wall Street and Washington applaud the policy only because the market continues to go up.

Michael turns the conversation to the present election and asks David how he perceives the rise of Donald Trump and Bernie Sanders. “What does it say about America’s present state of mind?” David says it shows that America has had enough. The public is responding to Trump because he isn’t part of the system. Regardless of Trump’s stance on issues he will probably get a large part of Sanders supporters because they both have an “against the grain” political stance. David refers to Hillary Clinton as “the class president of a failed generation”. He gives examples back to 1991 when Bill Clinton was president, pointing out the senseless wars and damage that has been done to the economy due to policy. Clinton is “A survivor of what has been a 30 year consolidation of bad policy” says David. Hillary Clinton was the survivor who happened to be in the right place at the right time.

Next, David goes into his stance on Glass Steagall and how he would reinstate it in a way that would re-stabilize the financial system. Michael then has David elaborate on Deutsche Bank and some of the other problems the European banking system is facing. Michael asks, “What will happen if there is another 50% decrease on the S&P? What will the authorities do next?” David believes they are out of options. Going to negative interest rates will create a firestorm that they can’t take on. It will induce the sensible people in America to riot. A real correction will not happen until the market is able to stay down and correct from the damage that happened in the propping up in 2008. Michael and David finish up the podcast discussing th Chinese economy. David believes their economy is just as un-sustainable as the United States. They are a “huge financial accident waiting to happen”.

In this episode of Trend Following Radio:

  • Glass Steagall
  • Clinton and Trump campaigns
  • Donald Trump and Bernie Sanders supporters
  • Deutsche Bank
  • European banking system
  • Sub-zero interest rates
  • Chinese economy
  • 2016 Election as a turning point in America

“[Economists] are making it up by the day, as they go along. This stuff is really stupid and it is getting crazier by the day.” – David Stockman

Mentions & Resources:

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Posted in Trend Following

“Has Micheal Covel devised a way to sharpen the trend following learning curve?”

Feedback in:

Hi Michael (or whoever is reading),

I’m huge fan of the podcast and I’ve read Trend Following and The Complete TurtleTrader. The idea of trend following, as a trading strategy, resonates with me. Trading all markets and trading human behavior, so to speak, without worrying about the impossible business of predicting future outcomes, is a strategy that makes sense to me. I want to be able to cut out the noise, ignore the fed, prevent emotional decision making, avoid analysis paralysis, but still be able to identify “cheap and hated” sectors where the best money is made. Trend following might help me do these things. What I’m unclear on is what it takes to create a Trend Following system as an individual rookie investor. I’m sick of pitches on “proprietary systems” that beat the market. They all spin a good story. I don’t want to be told what and when to buy and sell. Would the flagship system show me to how to be a trend follower or just give me access to “Covel’s secret system.” I know Michael Covel knows his sh–, but I’m tired of “secret systems.” Trend following didn’t pay off for all the turtles, after all. Has Micheal Covel devised a way to sharpen the trend following learning curve? Or is he, in the end, selling recommendations?

Thank you,

Flagship is not recommendations. Read more here.

Posted in Trend Following

Bubbles, Rationality and Trend Following

Human nature isn’t rational. It blows bubbles and then pops bubbles—and we can see this going back hundreds of years seen across calamities that we have all heard about:

• Dutch Tulip Mania (1634-1637)
• The South Sea Bubble (1716-1720)
• The Mississippi Bubble (1716-1720)
• The British Railway Mania Bubble (1840s)
• The Panic of 1857
• The Florida Real Estate Bubble of the 1920s
• The Stock Market Crash of 1929
• The 1973–74 Stock Market Crash
• Black Monday – the Stock Market Crash of 1987
• Japan’s Bubble Economy and Crash 1989-current
• Dot Com Bubble (1999-2002)
• United States Bear Market (2007-2009)
• Flash Crash (2010)
• Chinese stock market crash (2015-16)
• Brexit (2016)

And on and on…

But it’s beyond simply not rational. Those events, the human action driving those booms and busts, are best described by academia’s Prospect theory, cognitive dissonance, the bandwagon effect, loss aversion and assorted heuristics in judgment and decision-making—to name a few of the hundreds of biases inherent in our lizard brains.


Posted in Trend Following

Ep. 496: Six Feet Under with Michael Covel on Trend Following Radio

Milton Friedman

Milton Friedman

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Michael Covel interviews Milton Friedman. Of course, Friedman is dead. Such the conundrum.

In this episode of Trend Following Radio:

  • Free lunch myth
  • Robin Hood myth
  • Collectivism
  • Case against equal pay for equal work

“The state is that great fiction by which everyone tries to live at the expense of everyone else.” –Frédéric Bastiat

Mentions & Resources:

Want a FREE Trend Following DVD? Get it here.

Posted in Trend Following

Ep. 495: Ted Parkhill with Michael Covel on Trend Following Radio

Ted Parkhill

Ted Parkhill

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Michael talks with Ted Parkhill. Ted has over 25 years of management experience in the investment business. He is a founding partner of systematic macro investment manager Incline Investment Management (IIM). He is also serves as an Assistant Professor of business at Sierra Nevada College in Incline Village, NV.

Prior to IIM he was the director of marketing for Zazove Associates a multi-billion dollar quantitative convertible securities manager. He was a senior marketing executive at John W. Henry & Company one of the original Commodity Trading Advisors.

In this episode of Trend Following Radio:

  • It is possible to consistently generate profitable returns through systematic trading
  • Markets are inefficient and therefore trends materialize
  • Trends last longer than people think
  • Prices reflect the sum of the knowledge of all market participants

“…Human nature never changes. Therefore, the stock market never changes. Only the faces, the pockets, the suckers, and the manipulators, the wars, the disasters and the technologies change. The market itself never changes. How can it? Human nature never changes, and human nature runs the market – not reason, not economics, and certainly not logic. It is our human emotions that drive the market, as they do most other things on this planet.” – Jesse Livermore 1940

Mentions & Resources:

Want a FREE Trend Following DVD? Get it here.

Posted in Trend Following

Napoleon Hill Featured on Trend Following Podcast

Napoleon Hill was born in 1883 and died in 1970. He is most known for paving the way for the new thought and personal success movement with his book, “Think and Grow Rich,” which has become one of the best selling books of all time. Its premise is to help people realize they have the power to create success within themselves by way of conscious and unconscious thought. His message is straightforward, pragmatic and clear.

The presentation [featured in Trend Following Radio episode 404] is centered on making a goal and how to use certain tools to achieve that goal. Napoleon starts off by explaining the power of motives. He says you have no right to ask yourself or anyone to do something unless you give an adequate motive. If you give someone a good enough motive to buy something from you or give yourself a a worthwhile reason to achieve a goal you can sell or accomplish anything. You can also trick your mind to believe anything by repetitive action. If you have faith in what you want to accomplish you will accomplish it. On the same note, faith without action is dead and faith without believing is dead. Napoleon believed that 98%-100% of people sell themselves short because they do not believe in themselves. He says, “The power of thought is the only thing humans have absolute control over.” By repetition, thought, and action you can educate your brain to pick up only the vibrations related to what you want. He stresses that you must make sure your subconscious mind knows you are the boss.

The power of motives, thought, and faith in yourself all goes into being able to create and carry out a plan successfully. Napoleon says to write out your major objective in life and give it a timeline. Make sure it is clear and precise. Keep your major purpose to yourself. Your actions speak for themselves, and the envy of mankind can slow you down. Also, leave your plan flexible. Nobody can put limitations on you except for yourself. With that being said, acknowledge your weaknesses but don’t let them overtake you. If you keep your mind positive, it becomes greater than all the negatives.

Feedback in:


Thank you, thank you, thank you for posting the podcast interview with Napoleon Hill. In late 1975, I was fortunate enough to read an article in the Chicago Tribune about a man whose life was changed after he read “Think and Grow Rich”. As a recently divorced single Mom, I was so ready to hear his message. “Think and Grow Rich” literally changed my life and it was a joy to hear this man speak after so many years. His work continues to bring amazing gifts into my life and I thank you for reminding me what started it all so many years ago.
Sincerely, [Name]


Napoleon Hill

Napoleon Hill

Posted in Trend Following

Curiosity Created the Trend Following Trader

Many stumble onto trend following due to simple curiosity. An excerpt from Trend Following:

Can you remember how to experience simple childlike curiosity with no agenda other than simply to know? The curiosity I am talking about is open-ended and enthusiastic. Kids have the same wide-eyed wonderment when they take apart their first toy to figure out how it works.

Emotional issues aside, many traders remain fixated on academic intelligence as their only decision-making tool. William Eckhardt, a longtime trend follower, sees the issue:

“I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few are not. Many outstandingly intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”

When it comes to outstanding trading, emotional intelligence is as important as IQ. Because we are conditioned to appear “book smart,” we are often afraid to be curious. We think that by asking questions, we’ll be perceived as ignorant; although in truth, by not questioning the world, we get into more trouble. Still others might not fear the question, but instead fear the answer, which might be the piece of information that requires integration into your life or worse, information that proves you wrong. Open ended curiosity lets you take a step back and see everything for what it is right now.

For most of our lives, many of us spend our time listening to someone else feed us information. Then we are judged on how well we can regurgitate that information back to whomever offered it in the first place. When it comes time to taking responsibility for our decision making, we are constantly waiting for someone else to tell us what to do or checking to see what others are doing. Curiosity has been pulled from us.

Now feedback from a listener:

Hello Michael,

First I’d like to introduce myself. My name is Terry. I hope this doesn’t sound stalker-ish but it seems we have some things in common:

  • I know you lived in San Diego for a while. I was born and raised there.
  • I know you started your journey throughout Asia in February of 2013. I took mine in March of 2013 (Albeit, much smaller. I only traveled to Hong Kong, Thailand and Vietnam).
  • I’m still working my way through your podcasts but I think you’re still in Saigon, is that correct? (I really liked that city). I now live in Chiang Mai, Thailand.

It’s interesting how sometimes everything just seems to come together in life. I was introduced to Trend Following by a value investing newsletter writer, of all people. His name is Tim Price. I think I heard you read something of his on a podcast. Anyways, he dedicated a whole issue to the concept of Trend Following and even showed the proof that it works. His bottom line was that he wasn’t changing his methodology but thought that investing part of a portfolio in a Trend Following fund is a good way to diversify.

He had a link to in that issue and that is how I was introduced to your materials. I immediately felt like I was home. I’ve dabbled in futures trading in the past as well as options trading. I even studied under Larry Williams for a while. I never did get the hang of “predicting” trends with chart patterns though.

Over the years, the majority of my investment money was tied up in a 401K. Of course, I lost 50% of that in 2008 like many others. I vowed I would not let that happen again and began using a crude form of Trend Following (I didn’t know the term then) using a 2 SMA crossover system. I took signals from that to move money in and out of equity funds. I admit I was sloppy with it and could have done better but I managed to build it back up to where it was before and then some.

I left my job when I moved to Thailand and I now have those funds in a self-directed IRA. I’ve done a little value investing with it using newsletter recommendations (I did pretty well that way with a small Roth IRA). However, after getting into your materials I’ve come to realize that it’s just another form of buy and hold. I receive some good recommendations for what to buy, but no exit strategy other than waiting for a sell recommendation.

So as I said, I’m still going through your podcasts (I feel like I’m getting a college education with all the great guests you have) and I’ve read The Complete TurtleTrader as well as Trend Following. (I posted reviews on Amazon)

Now I’m still hungry for more. I intend to read your other books but I’m anxious to get going with this and purchase your Flagship training. I guess I still have a little of the value investing mindset because I’m now going to ask you for the discount you talked about in your emails.

Let me know what I need to do next. I’m looking forward to hearing from you.

All the best,

Thanks! We are long connected now and I know you are on the path.

Posted in Trend Following
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