Who Is Right?

One windy day two monks were arguing about a flapping banner across the shore.

The first said, “I say the banner is moving, not the wind.”

The second said, “I say the wind is moving, not the banner.”

A third monk passed by and said, “The wind is not moving. The banner is not moving. Your minds are moving.”


Note: Parable from Edward Allen Toppel. Toppel was an independent floor trader in the S&P 500 futures pit in the Chicago Mercantile Exchange. He has nearly 20 years of floor experience and has been a member of the Chicago Board Options Exchange and the Chicago Board of Trade. Prior to being a trader, he worked at Bear, Stearns & Company.

Mike Aponte: The Making of a Card Counter

Mike Aponte
Mike Aponte

Caught this great excerpt from Mike Aponte that applies to trend following and or any other life pursuit:

One of the questions I’m often asked is, “What is the most important trait in becoming a professional card counter?” The first thing that jumps to mind for most people is genius mathematical ability. True, being good at math is a plus, but the math involved in card counting is simple, middle school arithmetic. We’re not talking advanced calculus or differential equations. Having trained many people how to count cards at a professional level, there are three traits that are more important than mathematical ability. At the top, I rank high commitment level as #1.

With every person that I have trained that went on to become an accomplished card counter, it was very evident from my first interaction with them, that they were not only willing, but excited about putting in the time and energy necessary to master the knowledge and skills necessary to gain the winning edge. My most successful student to date, “Al”, is someone who barely graduated high school, getting D’s in math. During the time that I spent with AL, it became apparent that he was an underachiever when he was younger, but at the same time Al certainly was nowhere in the math league of Good Will Hunting. But what Al had going for him, was a real, serious commitment to turning his fortunes around at the blackjack tables. And to his credit he did exactly that. Many people have a get-rich-quick mentality, focusing only on the potential upside, not on what it takes to get there. No matter the endeavor, there are no shortcuts to achieving your goals.

Who is Aponte? The bio: “Mike Aponte, also known as MIT Mike, is a professional blackjack player and a former member of the MIT Blackjack Team. Aponte was part of a team of Massachusetts Institute of Technology (MIT) students that legally won millions playing blackjack at casinos around the world by counting cards. He is the basis for one of the main characters, Jason Fisher, in the book, Bringing Down the House, by Ben Mezrich, which inspired the motion picture, 21.”

Mike was one of my earliest podcast guests. You can listen here:

I still remember where we did that interview–great Mexican restaurant on PCH right near the intersection with Newport Coast Drive. Wow what a view! Had to pull a shot from Google:

PCH View in California
PCH View in California

That is exactly how it looks.

Ep. 614: Two Trading Legends with Michael Covel on Trend Following Radio

Tom DeMark
Tom DeMark

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Very experienced guys make great interviews. They bring age, perspective and wisdom to the table. Tom DeMark and Perry Kaufman are two men that have previously been on the podcast that exemplify this statement. Michael went back into the archives to bring these men and their interviews on the podcast today.

Perry Kaufman is an American systematic trader, index developer, and quantitative financial theorist. He is considered a leading expert in the development of fully algorithmic trading programs. He currently is president of Kaufman Analytics.

Tom DeMark is founder and CEO of DeMark Analytics and the creator of the DeMark Indicators. Tom considers himself a market timer and believes that fundamentals are critical; however, he and Michael still have a lot in common. His work is price and technically driven.

In this episode of Trend Following Radio:

  • Price movement
  • Fundamentals
  • Technical analysis behind the scenes
  • Elliott wave
  • The Fibonacci sequence
  • Forecasting
  • George Soros
  • Michael Steinhardt
  • Paul Jones
  • Steve Cohen
  • Computerizing indicators
  • 100% algorithmic trading
  • Systematic vs. Automated
  • Optimization vs. Validation
  • Tail events
  • Discipline

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43 Kick Ass Trading Rules for Bitcoin and Crypto Trading

43 Kick Ass Trading Rules for Bitcoin and Crypto Trading
43 Kick Ass Trading Rules for Bitcoin and Crypto Trading

These are some of my favorite money-making gems pulled from the historical wisdom of trend trading pioneers Richard Donchian, William Dunnigan, Amos Hostetter, Jesse Livermore, Roy Longstreet, and Dickson Watts all for the modern day Bitcoin trader:

  1. Don’t fight the Bitcoin tape!*
  2. Like sharp instruments and strong spirits, leverage confers many benefits, but only when used with care.
  3. Limit losses and ride profits, irrespective of all other rules.
  4. Of all the speculative blunders, there are few greater than trying to average a losing game.
  5. Always sell what shows you a loss and keep what shows you a profit.
  6. You can’t force Bitcoin into giving you something it doesn’t have to give.
  7. Talk is cheap and Bitcoin rumors are even cheaper.
  8. Courage in a speculator is merely the confidence to act on the decision of his mind.
  9. A loss never bothers me after I take it. But being wrong, not taking the loss, that is what does the damage to the Bitcoin pocketbook and to the soul.
  10. The Bitcoin trend is evident to a man who has an open mind and reasonably clear sight.
  11. In a narrow market, when price moves within a narrow range, the thing to do is to watch the market, read the Bitcoin tape to determine the limits of prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction.
  12. Watch Bitcoin with one objective: to determine the direction of price tendency.
  13. Bitcoin prices, like everything else, move along the line of least resistance.
  14. It cost me a million dollars to learn that the dangerous enemy to a trader is the susceptibility to the urging of magnetic personality combined with a brilliant mind.
  15. Have a profit? Forget it. Have a loss? Forget it even quicker.
  16. It was never my thinking that made the big money for me. It was my sitting, my sitting tight.
  17. There is only one side to the Bitcoin market and it is not the bull side or the bear side, but the right side.
  18. If you don’t know what’s going on, don’t do anything. Bitcoin is never wrong, opinions often are.
  19. Don’t be too curious about the reasons behind Bitcoin moves. The smarter you are, the longer it takes.
  20. When time is up, markets will reverse.
  21. Don’t expect the Bitcoin tape to be a lecturer. It’s enough to see that something is wrong.
  22. Don’t imagine that Bitcoin that once sold at 17000 is cheap at 15000.
  23. A man does not swear eternal allegiance to either the bear or bull side of Bitcoin. People believe what it pleases them to believe.
  24. Trend followers plan when they will get out before they ever get in. Know every day what your portfolio is worth.
  25. Calculate what your risks are on any given day for all Bitcoin positions.
  26. Controlling risk is not the same thing as avoiding risk. If managing risk is an integral part of your philosophy, when your risk level goes up or down, you simply adjust.
  27. Buy Bitcoin market strength and sell market weakness.
  28. Keep a positive attitude, no matter how much you lose.
  29. Don’t take the Bitcoin market home.
  30. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
  31. In the world of money, in a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word. Nobody.
  32. When the Bitcoin ship starts to sink, don’t pray…jump!
  33. Assimilate into your very bones a set of trading rules that works for you. Thou shall not trade against the Bitcoin trend up or down.
  34. There is nothing new on Wall Street. There can’t be, because speculation is as old as the hills.
  35. Whatever happens in Bitcoin today has happened before and will happen again.
  36. An ability to shift on a dime in Bitcoin is critical when shifting time comes.
  37. A common deception—self-deception.
  38. Fools try to prove that they are right. Wise men try to find when they are wrong.
  39. All see; few observe, fewer still compare.
  40. The foolishness of the many is the opportunity of the few.
  41. The man who conforms never transforms.
  42. Some men are alive after they are dead; others are dead while still alive.
  43. The unpardonable sin–not to make money in Bitcoin.

Lastly, consider William Worthington Fowler’s wisdom circa 1870:

“To the merchant and banker, it is a financial centre, collecting and distributing money, regulating the exchanges of a continent and striking balances of trade with London and Frankfort. To the outside observer and novice, it is a kind of work-shop thronged by cunning artisans who work in precious metals, where vessels of gold and silver are wrought or made to shine with fresh luster, and where old china is fire-gilt as good as new. The moralist and philosopher look upon it as a gambling-den, a cage of unclean birds, an abomination where men drive a horrible trade, fattening and battening on the substance of their friends and neighbors—or perhaps a kind of modern coliseum where gladiatorial combats are joined, and bulls, bears, and other ferocious beasts gore and tear each other for public amusement. The brokers regard it as a place of business where, in mercantile parlance, they may ply a legitimate trade, buying and selling for others on commission. To the speculators, it is a caravansera where they may load or unload their camels and drive them away betimes to some pleasant oasis. To the financial commanders it is an arsenal in which their arms and chariots are stored, the stronghold to be defended or besieged, the field for strategy, battles and plunder.”

Follow these trend following rules and you can make a money up and down and up and down in Bitcoin.

Note: Proven trading systems for Bitcoin trading.

*What’s tape? The old time way (pre-internet) to get stock quotes:

Stock Quotes Before Internet
Stock Quotes Before Internet

Ken Tropin: Robust Trading Systems

A very successful trend follower (Ken Tropin) offered:

“In order for a system to be successful, it has to be what I call robust. Robust means that I can test that system in a market I designed it around. Say I’m using it in the treasury bonds, and then if I switch that market and I try that system in the Euro, it still works. And if I change its parameters, it still works. And if I switch it over to corn — something totally different than treasury bonds — it still works. And if I look at some data that was out of sample from what I designed it around, it still works. Then I have something that might be interesting and have a chance of living in the future. Because the nature of data is it changes a little all the time. And so the key to success in systems trading is to have what I call a loose fitting suit. I can’t have a suit that’s so tight and perfectly proportioned to me that if I gain two pounds, it won’t fit the data anymore.”


Ep. 613: Matt Smith Interview with Michael Covel on Trend Following Radio

Matt Smith
Matt Smith

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Matt Smith is CEO of Royalty Exchange, an online rights platform where users sell portions of their royalty income and investors bid on it. The primary goal of Royalty Exchange is to make royalty streams investable. They have held over 200 auctions in the last 18 months where artists and investors interact in the buying and selling of royalties. Recently Matt launched a sister company Royalty Flow–created to purchase larger royalty streams and get more investors involved.

What is the process of Royalty Flow? Investors can buy shares through a platform called Folio, those shares are then transferred to a major exchange like Nasdaq. Royalty Flow was created after being approached to buy Eminem’s royalties. Royalty Flow provides a way for a pool of investors to purchase. What are motivations for investors to buy royalties? Investors view this as a hedging strategy because it is uncorrelated to their other portfolios. In contrast, what are some motivations for selling off royalties?

There are hundreds of thousands of investors that contribute to artists getting their music out there – music producers, song writers, etc., not just performers. Those contributors have royalties. Artists and their contributors see the advantages to diversification and investors see a sense of security in having a steady flow of income outside of their Wall Street portfolios.

In this episode of Trend Following Radio:

  • Streaming music
  • Music royalties
  • ICO’s
  • SEC regulations
  • Sesame Street royalties
  • Eminem royalties

“There should be consequences for poor decisions. That’s called life.” – Matt Smith

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