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“Play Calling Is About Probability, Not Certainty”

Posted on by Michael Covel

Take two traders who win 40 percent of the time with their winners being three times as large as their losers. One has a history of 1,000 trades and the other has a history of 10 trades. Who has a better chance in the next 10 trades to have only 10 percent of their total trades end up winners instead of the typical 40 percent? The one with the 10–trade history has the better chance. Why? The more trades in a history, the greater the probability of averages holding true. The fewer trades, the greater the probability of moving away from the average.

Consider a friend who receives a stock tip, makes some quick money, and tells everyone about it. There is a big problem with this scenario. His population of winning tips is extremely small–one to be exact. That’s statistically insignificant. He could just as easily follow his next hot tip and lose all of his money. One tip means nothing. The sample is essentially anecdotal evidence.

Thinking in terms of statistics is everywhere if you are observant. During a Monday Night Football game, one of the announcers, Ron Jaworski, put numbers and odds in perspective for playing the game of football: “Play calling is about probability, not certainty.”

It is the same in trend following trading.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Great Trading Is Not Some Sixth Sense

Posted on by Michael Covel

Tom Willis, a close friend of Richard Dennis, the father of the Turtles, put it succinctly:

“Are Turtles grown, or can they be taught? Do they have a magic sixth sense or something? The jury is in, isn’t it? They’d be better off having the knowledge implanted than relying on a sixth sense. I think I could take a kid who wasn’t my son and say, ‘Do this, I’ll pay you $50,000 a year, or you’re fired if you don’t exactly follow it.’ He’d beat me every day, every week, every month and every year.”

Two books that back that notion of practice and teaching?

The Talent Code
Talent Is Overrated

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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• Frequently Asked Questions
• Performance
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Pencil and Paper: The Secret to Success?

Posted on by Michael Covel

One of John W. Henry’s associates elaborated on the early days:

“Originally all of our testing was done mechanically with pencil and graph that turned into lotus spreadsheets, which was still used extensively in a lot of our day to day work. With the advent of some of these new modeling systems like system writer, day trader and some of the other things, we’ve been able to model some of our systems on these products. Mostly just to back test what we already knew, that trend following works.”

Had this same conversation this year with one of the interviewees for my book The Little Book of Trading. The difference? He was not talking of thirty years ago, but about being success today!

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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• Frequently Asked Questions
• Performance
• Research
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Alexander Ineichen on Following the Trend

Posted on by Michael Covel

Some research (PDF) from Alexander Ineichen. Nice to see my book Trend Following in the bibliography.

Remember: “The aim of the wise is not to secure pleasure, but to avoid pain.” –Aristotle

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Striking Out Is Part of Winning

Posted on by Michael Covel

I put this great quote in my bestseller Trend Following:

“What is striking is that the leading thinkers across varied fields–including horse betting, casino gambling, and investing–all emphasize the same point. We call it the Babe Ruth effect: even though Ruth struck out a lot, he was one of baseball’s greatest hitters.”

You have to get it–to survive. Ever hear political leaders talk like this? No, political leaders promote the nonsense that there will never be a stubbed toe again. Believe that?

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

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• Frequently Asked Questions
• Performance
• Research
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

“Good Morning Mr. Dennis!”

Posted on by Michael Covel

My book on the Turtles serves up lessons that never go stale. An excerpt:

People were willing to do just about anything to get Dennis’s attention [to get hired as one of his student traders]. Of all the approaches his students took to get themselves admitted to his trading school, Jim Melnick’s was the most extreme and inventive. He was an overweight, working-class guy from Boston who was living over a saloon in the Chicago suburbs. However, Melnick was determined to get as close to Dennis as possible. He actually moved to Chicago just because he’d heard about Richard Dennis. He ended up as a security guard for the Chicago Board of Trade and every morning would say, “Good morning, Mr. Dennis” as Dennis entered the building. Then, boom, the ad came out and Melnick got selected. Dennis, who was loaded with millions and power, took a guy off the street and gave him the opportunity to start a new life. The story of Melnick is pure rags-to-riches. How did he know that getting that close to Dennis could lead to something? He didn’t, of course, but he hoped it would. His self-confidence was prophetic. Another of Dennis’s students described Jim’s “everyman” qualities: “He reminded me of a truck driver and like magic became a ‘Turtle’ and he still couldn’t believe why or how…as far as where he is today, I have no clue at all.” Mike Shannon, a former actor who had left school at the age of sixteen, made it to Dennis’s door, too. He recalled, “I was working as a broker, and I was a very bad commodity broker.” Through a bunch of floor brokers Shannon found out about the ad, but he knew his résumé was problematic. He had a solution to that: “I made up a phony résumé, and I sent it off to Richard Dennis. I used the school of audacity to get the job.” People get fired or, at the very least, don’t get hired because of falsifying a résumé, but that was not how it worked with the eccentric head of C&D Commodities.

Nice.

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
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• Trading Technology
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Don’t Worry About How You Get a “Stake”–Just Get One

Posted on by Michael Covel

From The Little Book of Trading:

Kevin Bruce is living proof that there is no need to be in New York, London, or Chicago–flaunting a sharp business suit and trading in a sky rise. Bruce is a small-town guy from Georgia with no ancestral connection to Wall Street, who has not only made it on Wall Street but conquered it. Heed his path.

Bruce spends his time far away tucked in quiet spots in Richmond, Virginia. He works out six times a week at his local YMCA, and still drives his 1996 Ford pickup. With a net worth of nearly $100 million, he prefers to live life just as he always did before making that fortune. He is low profile. Most people have no idea of his wealth. He says, “I guess that means I’ve done a pretty good job of just being me.”

More:

While Bruce was crafty in his early trading, almost tripling his initial seed money, he was really crafty in the way he built up his $5,000 nest egg. When he was about 15, he started the practice of packing a lunch and taking it to school. The cafeteria food wasn’t great, but he could buy a lunch for just 35 cents. Bruce would meet other kids in the bathroom daily and auction off his home-style lunch. He would then eat the cafeteria lunch–and would usually net about $2. Nice trade!

Inspirational? Yes, absolutely.

Of course, you could always grab a tent, your best protest vibe and head to lower Manhattan to live at Occupy Wall Street. However, I am willing to bet the next Kevin Bruce is not hanging out there.

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

• Trend Following Podcast Guests
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• Crisis Times
• Trading Technology
• About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.