Episode: Dancing With Yourself. Trend Following with Covel

Synopsis: How is trend following a bit like the Billy Idol song, “Dancing With Myself“? Michael Covel explains the importance of maintaining an independent spirit, feeling comfortable standing alone and outside the crowd and being your own self. Covel contrasts this to the famous scene in “American Psycho” where a group of executives compare the card stock and fancy presentation of their business cards trying to impress one another. That’s the complete opposite of what “Dancing With Myself” gets at. Worry about yourself, not the crowd. Covel then quotes hedge fund manager Hugh Hendry. Hendry holds himself out in public as coming from a fundamental perspective, even though his hero is trend trader Bruce Kovner, who was trained by Michael Marcus, who was trained by Ed Seykota (all trend following traders). You get the picture. Hendry honestly states that he doesn’t know what’s going to happen, but he puts himself in the position to have probabilistic bets that can profit when the market moves–in whatever direction. Covel moves on to quote David Einhorn, a hedge fund manager. What will the Fed do if the bubble bursts when interest rates are at zero? Is Covel, in quoting Einhorn, trying to predict the future by talking about this subject? He’s simply mapping out what he sees: A world that’s rigged and manipulated, and a Federal Reserve that’s trying to make its buddies at the big banks wealthy. In the midst of this how can you protect yourself and profit? The only way you can truly protect yourself is by looking at the price in the here and now from a trend following perspective. You can make decisions based on the price movement without having any idea what the Fed is doing behind the curtain. There is no certainty. There’s only chaos, uncertainty, fractures, and cracks in the sidewalk. You have to have a plan before that fracture breaks. Although traders like Einhorn, Hendry, and John Hussman might not be trend following traders themselves, their observations certainly make the case for employing a trend following strategy. Special Offer? Free trend following DVD: www.trendfollowing.com/win.

2 thoughts on “Episode: Dancing With Yourself. Trend Following with Covel

  1. We have not seen the market closed for 2 days since 1888. So there is no precedent to follow indicating what might happen when after the market opens. So don’t try to predict it. Just go with what the market gives us, And, that is really all we can do with Tend Following. Identify when the trend changes and go with it. Sometimes I catch a big move, and sometimes I catch a small move, But I go with all the moves to make sure I catch the big up moves and avoid the big down moves. Been doing it for over 40 years. Most investors think it can’t be done, So they stay fully invested like they did in 2008.

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