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Diversification! Winner, Winner, Winner…

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Hi Michael,

I’ve written before. Wanted to say I’ve continued to listen to your podcast and am kind of blown away by how many there are and how good they all are. You’ve got awesome guests and you’re a talented interviewer. So thanks for this free podcast! It’s obvious you love it and your passion comes through to the audience.

A question for you: in the intro to the podcast, you say that you envision a time when we can make money in up, down or sideways markets. Does the “sideways markets” part refer to diversification (if one market is going sideways, another one will be trending, so you can still make money if, say, the S&P 500 is flat). Or is there a trend-following strategy for sideways markets?

Anyway, thanks again for making my daily commute interesting!

David

Diversification! See here.

“I have been reading Larry’s book (love it and love him) and I happened to see a few reviews on Amazon…”

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Hi Michael,

Just a quick one.

I have been reading Larry’s book (love it and love him) and I happened to see a few reviews on Amazon.

One of them said something along the lines of, “rubbish, doesn’t tell you anything about his strategy or what indicators he uses for technical analysis and charts…blah blah blah”.

Just incredible, to have bought the book you would think the guy or gal would actually have some idea of the concept of Larry and trend trading but clearly not and they will take absolutely nothing from the book and all the wisdom that is in there. My guess is they were expecting to be spoon fed an exact strategy that Larry uses (which they probably wouldn’t follow).

In my opinion he actually has done this – run your winners, cut your losses – it’s all there but the reviewer probably wanted something more along the lines of, “when the price crosses the upper Bollinger band and the 20 period moving average is higher than the 50 but no higher than the 100 period while the temperature outside is no higher than 45 degrees but no lower than 42 and the previous evening had a full moon, then and only then should you watch CNBC and go on twitter to find other like minded people to validate your trade. Once these all line up you should then enter the trade”.

Also on your recent podcast with Larry you mentioned how much material you have built up with Larry and you may release a monster episode of it all. Would love to hear this.

Thanks,

Lewis

Yes, there are many angry losers roaming Amazon…

Some Larry audio here for the learned.

“I originally bought your book to look at practical Risk Management examples…”

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Hi Michael,

I’ve been developing my Trend Following System over the last 10 years (think Donchian center line break out informed by Orderflow) and I’m finally now in the backtesting phase.

In a weird way this is sort of a hobby and like you said in your book my enthusiasm seemed to outlast my learning curve. I originally bought your book to look at practical Risk Management examples and am glad to know that others have found success. Though I have to admit, I personally enjoyed listening to the audiobook version (from Audible) more than reading the book.

Anyways, could I trouble you to send me a copy of that Trend Following presentation? Attached is a copy of my receipt.

Thanks,
Mike

The video.

Ep. 814: Gregory Zuckerman Interview with Michael Covel on Trend Following Radio

Gregory Zuckerman
Gregory Zuckerman

Subscribe to Trend Following Radio on iTunes

Jim Simons is the greatest money maker in modern financial history. No other investor–Warren Buffett, Peter Lynch, Ray Dalio, Steve Cohen, or George Soros–can touch his record. Since 1988, Renaissance’s signature Medallion fund has generated average annual returns of 66 percent. The firm has earned profits of more than $100 billion; Simons is worth twenty-three billion dollars.

Drawing on unprecedented access to Simons and dozens of current and former employees, Zuckerman, a veteran Wall Street Journal investigative reporter, tells the gripping story of how a world-class mathematician and former code breaker mastered the market. Simons pioneered a data-driven, algorithmic approach that’s sweeping the world.

As Renaissance became a market force, its executives began influencing the world beyond finance. Simons became a major figure in scientific research, education, and liberal politics. Senior executive Robert Mercer is more responsible than anyone else for the Trump presidency, placing Steve Bannon in the campaign and funding Trump’s victorious 2016 effort. Mercer also impacted the campaign behind Brexit.

The Man Who Solved the Market is a portrait of a modern-day Midas who remade markets in his own image, but failed to anticipate how his success would impact his firm and his country. It’s also a story of what Simons’s revolution means for the rest of us.

Gregory Zuckerman is the author of The Greatest Trade Ever and The Frackers, and is a Special Writer at the Wall Street Journal. At the Journal, Zuckerman writes about financial firms, personalities and trades, as well as hedge funds and other investing and business topics. He’s a three-time winner of the Gerald Loeb award, the highest honor in business journalism. Zuckerman also appears regularly on CNBC, Fox Business and other networks and radio stations around the globe.

In this episode of Trend Following Radio:

  • The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

Mentions & Resources:

“I drove from Arizona to Virginia last week and listened to your book Trend Following…”

To Think
To Think

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Hello Mr. Covel,

Well…I took an inexpensive “day trading” trading class offered by a young man last year. I was unable to actively trade at the time, but recently started trading full time (meaning studying and trading 8-12 hours a day) in a simulated account 4 months ago. I still have a lot to learn and have only started actually setting stop losses and limits in the 2 weeks.

For about the past month or so I’ve been making about $600-$1500 every day, when I stick to my plan. This does not include the trades I make trying out new trade ideas, but about 2 weeks ago I thought to myself “there has to be something I’m missing to not be able to capture more of what the day has to offer. I would place alerts where I thought the particular stock would go but didn’t trust myself and would close out my trade just to watch it go right up/down to where my alert was placed. At that point I started looking at longer time frames thinking there must be a way to capture more of these up or down trends.

Anyway, I drove from Arizona to Virginia last week and listened to your book trend following and it really made since. I’m relistening to it as I read along, now that I’m home, to hopefully understand it better and figure out what I have been missing.

So…to answer your question: I’m know I’m not getting all that I can get from each trade and I really think it shouldn’t require as many trades in a day, or week as I’m currently making.

Thank you for your time,
Carolyn

Your plan does not sound like trend following.

I would shift gears.

“Being in sales most of my life, I still can’t get over what a great business opportunity trading is…”

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I am a field sales rep for a global chemical company. I enjoy the freedom and independence of the work – my car is my office so your podcasts keep me inspired and pushing the button every day. But I had my own business before, so naturally I desire the true independence of my own business.

Being in sales most of my life, I still can’t get over what a great business opportunity trading is, and trend following in particular. The exchanges have built these awesome platforms, done all of this powerful marketing so your prospective customers and suppliers are available at the click of a button. No gatekeepers, prospecting, dead leads, cold calling, multiple decision-makers… none of that.

I now see making trend following trades like making sales calls. It is a numbers games, you can’t sweat any individual trade/sales call. A loss is like breathing, so on to the next one until you hit the home run, picking up singles and doubles here and there to pay the bills.

So the challenges:

More trading capital

Patience

I have trading capital of $70,000. I see the critical importance of compounding, so obviously more capital adds more firepower to your compounding. Any suggestions on sources for trading capital without borrowing money? A crazy idea I know.

Patience. This is where is trading diverges from sales. I can do more prospecting and sales calls to increase my closing volume, but I can’t make a market trend. I know this will come with experience, still… how do you wait… and wait… and wait…

I am beginning to think that trend followers must have something in common with the biblical Job… “the Market giveth, and the Market taketh away. Blessed be the name of the Market.”

Thanks again Michael.

Jason B.
FL

Great feedback! Check those links out I put in above.