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Ep. 489: Chris Voss Interview with Michael Covel on Trend Following

Chris Voss

Chris Voss

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Chris Voss is the author of, “Never Split The Difference: Negotiating As If Your Life Depended On It.” Chris is a former international hostage negotiator for the FBI. He has had an amazing career full of great experience and insights. Chris first entered the FBI in 1983 and has been involved with over 150 kidnapping cases. He started out working on a suicide hotline and quickly realized that his negotiating skills were applicable to all areas of life, not just hostage situations.

Chris starts the conversation off talking about how he begins hostage negotiations. It is about exchanging power and getting the upper hand early on in the negotiations. A lot of people want to think of negotiations as chess. Chris explains why this is not the case. You can make four moves in a row if you want. Not necessarily making one move, then a counter move by the other person. Chris goes on to explain that if you can walk out of any situation you don’t like, then you can win in any situation and you are able to have more fun with negotiating.

Next, Michael asks, “How do you go about negotiating with bat shit crazy people?” Even “bat shit crazy” has it’s patterns. Chris talks about being on Comedy Central and doing a skit on this exact situation. As long as he starts looking at patterns then things become aware to him and he can influence people’s emotions. When people don’t open themselves up to you, that is the first sign of danger. If people won’t talk, this is when you know psychologically they have shut down. 9-11 is an example of people being silent on the other side, shutting down, and leaving no room for negotiation. If you can ask someone “Have you given up on resolving this situation amicably?” Even having someone say “Yes” means they are immediately opening up a little more than they were before. Chris was always taught to go into situations knowing that people are not rational. They are driven by passion and purpose.

Chris also elaborates on “Why, How and Lying three times”. In general, “Why” questions make people feel defensive instantly. “How” questions make the other person feel powerful. People feel in charge when they are asked “How”, but it puts a lot of constraints on their answer. His last rule of negotiations is the “Lying three times” rule. If you get someone to lie three times then they most likely won’t act on that lie.

The podcast wraps up with bonus material of an interview between Michael and Chris recorded on a previous day.

In this episode of Trend Following Radio:

  • Aversion to negotiation
  • Negotiating skills
  • Never pretend people are rational
  • Business negotiations compared to hostage negotiations
  • Lying three times
  • “How” and “Why” questions

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Trend Following Feedback: Cracking the Code

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Michael,

I recently bought a copy of your book, Trend Following, which led me to your website and your podcasts. I stumbled across the concept of trend following several months ago when binging on the web trying to learn everything I could about investing, stocks, trading strategy, etc. I finally took some time to really start thinking about my IRA and how disappointing it was to feel like I had to trust blindly in the mutual fund recommendations from my financial advisor in order to have any hope of ever having enough money to retire or live the way I want to. I am career military, and never really had a ton of extra cash to dump into the Roth or to save, so the older I got the more I started to think how unprepared I am for retirement. I found a trend follower on the web who had a podcast and website (not you yet) which introduced me to the idea, and from there I started to follow his daily signals and try to “crack his code” using excel and downloading historical data in an attempt to develop my own system. He uses 20 day highs/lows for entry, 10 day lows/highs for exit, and an ATR based stop. This started me down a rabbit hole trying out a ton of variations of entries/exits, etc on whatever stock or ETF I thought was a viable candidate to try to find the most profitable system for each equity. What I was missing was the fundamental concepts and theoretical discussion that you provide in your book. Now I am focused on finding a robust long term trend following system to apply to any market/stock/etf using the probability and trade results distribution you illustrated in your book. I am super motivated to pursue trend following until I figure it all out. I consider myself as having above average intelligence and my Asperger’s gives me the laser focus and diligence (or stubbornness according to my wife) to put in the work to develop it and the discipline to follow it. I am currently looking at strategies using ATR, moving averages, and price highs/lows to define price breakouts, but could be off track. I don’t have any of the big trading system software packages, but I know with enough time and patience I will find the results I am looking for. I would certainly appreciate the guidance and DVD you promise to send in your podcast. I know you’re not gonna hand me all the answers on a silver platter, but I’ll take what you are offering, as every insight I can get I will take. Thanks for your help and for laboring through the long letter, take care.

Very Respectfully,
[Name]

Great feedback. Motivation for everyone. Video on the way!

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“Love your [trend following] work as always…”

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Gday Mike, Love your work as always. I trade for a living and listen to one of your episodes each day… helps to remind me I’m not alone. I still enjoy many of the early episodes, thanks for keeping them on your website. Your ability to interview such a broad range of educated and interesting guests is your strength. Many other trading podcasts are very fixed in their thinking and do not stray from trading. I have recently spoken with Mark Sleeman. I would love to hear him on your show again. Also, I am interested to hear more from traders based in Asia and surrounds. I also trade in many Asian countries as part of my overall diversification. We never hear anything of Indonesia, or Philippines, or even Korea in the western trading media. Also, how about an episode from the Ho Chi Minh stock exchange. A history and a facts etc. Must be some price action guys over there too! Keep up the good work. Love your books and podcasts.

Kind regards,
[Name]

Thanks for the advice and feedback!

Trend Following with Michael Covel

Trend Following with Michael Covel

Posted in Trend Following

Trading Food For Thought: September 28th Edition

Posted in Trend Following

Trend Following Systems: Charts or Not?

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Hello Mr. Covel, I am a follower of yours for several years now since back in the day I read your book Trend Following. In one of your previous podcasts you said something in those lines: that a true trend following system does not require charts or looking at charts. Every aspect of the system can be systematized. This struck me. I totally believe it right. Unfortunately, most systems these days requires looking at charts and charts patterns. So I wonder if you know some trend following systems that do not require charts? And which are they? I know that the [name] system can qualify as one. But are there others?

Thanks.
[Name]

PS. Forgive my poor English, I am French.

My Flagship product does not require charts. If a trend following system “requires” charts its not trend following in my opinion.

Posted in Trend Following

Correlation Considerations in the Trend Following World

Feedback in:

Hi Michael, Again, appreciate everything. You are a great teacher and mentor. I do not miss a podcast.

My only beef is a compliment. More rants needed. Your last I found very insightful. Uncorrelated returns is of particular interest because our fund has demonstrated miniscule correlation to both indexes and peers. We have run a relatively net short healthcare fund since inception 9 years ago, and have managed to survive and perform. The most difficult task has been differentiating ourselves to potential investors while the entire sector rages higher. Fortunately, the right investors have taken notice and our assets have gone from 50M to 230M in 18 months. What I found particularly compelling and coincidental about your rant is that we were recently sought out by a huge institution looking to build a book of 10 managers with track records of double digit annual returns with little correlation. That institution is [name] Capital (did not hear from me). The manager discussed the strategy to us, although not as concise and eloquent as you did in 20 minutes. Would love to see that piece if you have it handy, thanks.

Also, need to make it out to Ho Chi Minh City. You sell the single life out there well.

Thanks for the feedback.

BTW, looks like my single life ended!

Posted in Trend Following

Ep. 488: Never Forget the Lessons with Michael Covel

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Michael reads some of his favorite quotes circa 1920’s/1930’s from a famed trader. These quotes are timeless bits of wisdom. Michael adds commentary throughout.

In this episode of Trend Following Radio:

  • How is the “price” made?
  • You will never know all the fundamentals
  • Speculation
  • Getting mad at the market gets you nowhere
  • Bull and bear markets
  • Entry and exit signals
  • 1920’s wisdom on numbers
  • Always be ready to catch that unexpected move
  • Follow the price action

“When the markets decide to deliver a cleansing flood, it comes without warning.” – Michael Covel

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Posted in Trend Following
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