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“The trend… can be a friend, but you have to choose your friends wisely!”

Posted on by Michael Covel

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Hello Michael,

Thank you for all the work you have done. I truely appreciate your books. I suppose I have always been a closet Trendi… but strongly influenced by technicals such as head and shoulders, double tops etc. Unfortunately I could rarely operate in name as a Trendi!

Why?

I was an international fund manager for 21 years and handled up to $10 billion dollars in one Fund I worked for 3 major pension funds… sold out $10 billion of stock in 6 international markets in 1987… 2 weeks before the crash and had a 47% return that year… Why? Because the US market had a clear double top and it was a market which just about played every extreme. Later in 1992 I went into stockbroking. Now again a closet Trendi… Why in my two careers was I a closet Trendi?

A) In Fund management … big reports of bullshit figures for a boards consumption (yes, they still want and believe in it) and you give them what they truly believe!!!! And in Stock Broking… you speak the numbers… and then of course better and better numbers in other shares. Numbers to generate movement and commission. You are keeping the ball in the air. Hard to be a Trendi but under “other reasons” clients got taken out at the end of a positive trend. Sometimes only on strong persuasion were they persuaded to go… but good things stay good too long and every client can’t sell. Well 99% can’t sell and they loose unless the broker berates them. I have heard a million reasons why clients don’t want to sell and they are all greed or plainly a form of “hypnotic trance.” Like a kangaroo in a cars head lights they get paralyzed and can’t run!!! So I call this inability to sell “The Kangaroo Effect” “It’s the smart Trendi’s winning edge”… he’s out and the crowd continue and continue to be mesmerized by the light! So today I run my own money and for the record I am a total Trendi.

I have learned a lot from Gann and many other writers on “the trend”. Yes I have started reading all your books to gain a greater and greater insight… all good stuff… they are piled up beside me. And I enjoyed your movie, especially the winning strategy of successful poker players. A great insight and just the movement of the sheep, crowd Psychology, it was a terrific movie. Can you suggest any more good books to read?

I have my own system and so far so good, but if I can get a better stop out process and entry process then I will adopt it … so I keep reading and I keep learning to improve my game. I don’t know whether I am a natural, time will tell. But in two years I have turned $50,000 into $1.7 million. Many questions in my mind remain unanswered.

Why did the smartest Trendi, Jessie Livermore, loose it after getting it so right? How much of a Trendi was Bernie Baruch? Is Warren Buffett really a closet Trendi?

Why do so many Fund Managers average down but rarely average up and why do so few fund managers ever cut their loosing positions (my own belief is the ego is too big to admit a mistake)? Yes it’s always just a bad market! Much easier to sell a bad market to the directors rather than admit a mistake and get kicked out pronto… After all, directors can only do one thing with people who make consistent mistakes… even if they are very good and consistently out perform the index!!! It’s like Eric Barker says in “Barking up the wrong tree”. Good people who follow the systems that prevail are trusted even though the Philosophy is wrong. So smart people know they can only operate the correct philosophy to win under disguise!!! Could successful people all be outliers, just closeting themselves and appearing to be true company men? I know I did it because people love stories and any story can be designed to fit success! I am glad I finally can do it all my way and can stick to my knitting… The trend in the end, can be a friend, but you have to choose your friends wisely!

Your strong supporter.
[Name]

Thanks!

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.

“I want to go down this rabbit hole…”

Posted on by Michael Covel

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Great podcast with Denise Shull! Reminded me to continue reading Market Mind Games that I had begun a year or so ago! Wonderful material and you hit on key issue of whether it is technique that needs honing vs going deeper into ones psyche and naming all the intricate feelings that are part of recurring patterns that manifest in trading decisions… I want to go down this rabbit hole but not sure how best to do it… I am sure Denise charges a lot for her consulting and coaching but will start with the book. Hope you are well!

[Name]

Thanks!

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.

“Next time I will come with my ‘A’ game…”

Posted on by Michael Covel

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I have only listened to about 80 of your podcasts. So I am about 2 months into my trend following journey. I mostly trade stocks and have for some time. I am from the O’Neil school of trading. So when I first started trading I was mostly fundamental and some technical. But as I have advanced, I see the technical side or the trend following side as more my style. I am just about to read your new book. So If I am not using the terms trend following and systematic properly it is only that I am pretty new to your podcasts.

And again, I can’t tell you how much I appreciate your podcasts. They do mean a lot to me. I feel like most TV, Radio, Movies (except yours), kill your brain cells and make you dumber when you are done. I find your podcast to be compelling and very informative. It is the complete opposite of other forms of media. Where I really commend you is that you are a great interviewer. Personally I would say you are one of the top 5 interviewers. In fact I believe you surpass anyone in the financial media by a wide margin. And I will give you an exact example. CNBC gets 3 hours with Warren Buffet. They ask him about politics and the fed. It makes me cringe. The guy is an investor and business man! UGH. I know you would never do that. You bring out the best in your guests and being in your audience it is appreciated.

I will continue to recommend your podcasts to everyone I know. I hope they enjoy it as much as I do.

Again I appreciate your time
[Name]

Thanks!

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.

The Serious philosophy Behind Technical Analysis

Posted on by Michael Covel

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Dear Michael, I need to contact you because I have some challenges and looking for answers/solutions. Simple question: What has been according to your own experience the most difficult part to highlight/discuss ‘technical analysis’ as a serious philosophy? I find most people (even financial professionals) rarely have an (honest) open mind to consider the awareness of their thoughts/positions in relation to crowd/group thinking. I highly appreciate your findings/reply. Keep up the good work.

Best regards,
[Name]

You saw my newest 2017 edition of my book Trend Following? Your question is not exactly the question you want answered. There is a needed wider perspective.

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.

Seeing the Light when Trend Following

Posted on by Michael Covel

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Dear Mr. Covel,

My name is [Name]. I’ve been wanting to write to you to express my gratitude for what you do, so here it goes.

A little background on me so you know where I’m coming from. I live in [Name] and I’m a 27-year veteran officer of the [Name] Police Department.

Like most people I know, for the majority of my life I’ve been financially illiterate in regard to anything related to the stock market. I always found financial matters boring, therefore I paid little attention to them.

My interest perked up a bit while I was in the police academy. We had a one hour class one day with an instructor who discussed participation in the department’s 457B plan. Charts were passed out which graphed how much money we could expect at retirement when projecting an annual amount contributed combined with how many years in service times an average expected annual yield. When I looked in the lower right corner of that graph and saw that a long career with a maximum payroll deduction could exceed a million dollars, that was for me! I signed up immediately and have been maxed out in my 457B plan for most of the time since that eye-opening day.

My financial literacy at that point in my life was this: just pump money into my retirement plan, then when I retire I’ll be set. Maybe I’ll even be a millionaire. I still hadn’t fully recognized then how my retirement plan hinged on stock market performance.

Fast forward to about seven years ago and the purchase of my first iPhone. With my new-found interest in Apple I read a news article which related how Apple’s stock price had, over the course of a few years, increased over 30,000%. That was simply staggering to me. If I owned $5,000 worth of Apple stock at its lows I wouldn’t have to wait until I was retired to be a millionaire. With that revelation, my interest then turned to the stock market.

I had long since established a practice of determining, pursuing and achieving goals throughout my life, so I confidently embarked on a goal of becoming a successful trader/investor. With knowledge gained through my studies, it was only then that I began to grasp the mechanics of my retirement plan. Understanding for the first time then how my savings had been cut in half twice – the 2000 and 2008 bear markets – with my being virtually oblivious to it during those times sickened me. I’m grateful that I finally woke up and can confidently manage and safeguard the retirement accounts for my wife and I now that we are close to retirement. Up until recently it has been sheer dumb luck that we have benefited from the market’s current run to all-time highs.

Back to the trading. It has been a challenge, to say the least, but now in my sixth year I am finally practicing a strategy that works along with the discipline to execute it. A large percentage of that results from a handful of traders such as yourself who have shared what they’ve learned so that “home gamers” like me can find the means to succeed. I don’t think anyone who has studied or trained for a career in the financial world of trading truly understands the myriad of pitfalls novices face, or if they do they likely exploit them for their own gain. Fair enough, but it’s easy for me to see why most traders give up, blow up or wash out. I’m glad to count myself among the minority who have navigated successfully through the minefield where so many others have failed.

“Trend Following” has long been on my “must read” recommendation list. Congratulations on the publication of the new edition of your book; it’s a beauty. My old version is heavily highlighted, and I expect my new copy will be as well.

I’m also an avid fan of your podcasts. From those, and your writings, what I appreciate above all else is your genuine sense of honest, no bullshit, tell it like it is approach to getting your message across to those eager to listen and learn. Your podcasts are light years ahead of any others I listen to because you actually engage your guests with questions and comments pertinent to what they’re talking about, making them more enthusiastic about how they’re responding. Nothing ever comes off sounding scripted, and that’s damn refreshing and entertaining.

The main reason I mentioned that I was a police officer is because of an interesting parallel in regard to each of our paths through life. I can say that after 27 years of working the streets of [Name] there is a world which exists all around us which most people aren’t even aware of, and probably never will be. I tell family and friends true stories of experiences I have, and even as I’m speaking to them I can see the expression on their face belies the fact that they’re not fully believing what I’m saying, or at the very least I’m exaggerating. My experiences are often too contrary to experiences they’ve had in the world they live their lives in. They have no reference point to fathom the extremes of the world I work in.

I’ve never stepped foot on Wall Street, but the parallel I see between you and I is that, with my own unique perspective in mind, I can more readily believe and accept your no bullshit, tell it like it is interpretation of what really happens in the real world of Wall Street which most people aren’t aware of, and probably never will be. What you write and what you say sidesteps the sensationalized media noise of CNBC, et al., and shines a light on a world so contrary to those who accept CNBC noise as gospel that they can’t or won’t fathom the possibility of anything other than what they’re being spoon fed as truth.

The insight of real worlds existing beyond the worlds most people see is something I think we have in common, in our own ways. Accepting the wisdom of your unique perspective of the trading world has helped me greatly in garnering the measure of success which I’ve achieved thus far. For that, I thank you.

Thanks for taking the time to read this. I know it got a bit lengthy, but I guess I got on a roll.

If you’re ever in [Name] I’d be delighted to meet up with you somewhere for a bite to eat, or just to shake your hand and thank you in person for all you’ve done for me, if possible.

Thanks again!

Sincerely,

[Name]

Thanks! Awesome feedback. Made me smile.

Further Trend Following Articles and podcasts: Interview with Michael Gervais; Bryan Caplan Podcast; This Monkey’s gone to heaven; How Nicolas Darvas made $2 million Trend Following, and the Big Event Big Crash.

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.

Review of the Trend Following New Edition by RCM Alternatives

Posted on by Michael Covel

Great review of the new edition of Trend Following from by RCM Alternatives:

We’re not sure if author Michael Covel has a tattoo across his back of a trend in a market like Sugar, but suffice to say the man loves him some trend following. We follow him on twitter @Covel and listen to his wonderful podcast from time to time – so when we saw the news that he had released a new and improved fifth edition of his book “Trend Following,” with its new tagline: “How to Make a fortune in Bull, Bear, and Black Swan Markets” we had to see what was new. We’ve read all of Covel’s books over the years but realized with this recent edition that we had never reviewed any of them on the blog, despite including them on our Required Reading list.

So we got to reading all 600+ pages. It’s a beast of a book, but at least there are lots of “pictures” in the form of charts and tables.

The Michael Covel new edition Review Highlights:

One of the more surprising additions to the new version hit us right off the bat – with the forward written by blogger/investment advisor/Bloomberg columnist Barry Ritholtz. Barry writes great stuff, but the surprising part is that he mostly writes against investing in anything except buy and hold stock market and real estate investments. And here he is doing the foreword for a book on decidedly not buy and hold folks – managed futures hedge fund strategies and legends. Perhaps he’s coming around, and understanding the math will unseat some biases for him.

Once you get into the meat of the book, Covel starts by digging into the principles behind trend following, which seems as old as the hills to us, ingrained in our psyche… BUT may be new to those who haven’t lived it.

Trend followers are traders, not investors – going long and short. Trend followers are systematic – removing emotion and fake news and bogus earnings reports, and all the rest. Price rules all. Price is the final determinant. Trend following can be a bumpy ride – indeed, it can be argued that the bumpy ride is what results with the payoff.

The best part of the book remains the highlighting of trend following legends. As Covel says, “the wise and most efficient way to understand trend following is not by learning rules…. But by reviewing every last detail of the traders who practice it…” and he gets right into it, starting with none other than the largest trend follower in the world, $20+ Billion Winton Capital’s David Harding (although he might not like that moniker). After that, there’s Boston Red Sox and Liverpool Football Club owner John Henry and a host of others famous in our line of work. As the line in ‘Top Gun’ goes, the list is long and distinguished, just like… “

Some of the best nuggets in here include John Henry starting with a $16,000 managed account; Ed Seykota’s amazing average of 60%, after fees, in his prop account between 1990 and 2000, and a copy of the 60+ questions asked of those applying for the famous turtle trader program. Next he goes into the “performance proof” for trend following, which he neatly packages here with tables upon tables of trend following managers long term returns spanning 100s to 100s of percent, and correctly noting that volatility doesn’t equal risk in a special way for trend followers, which tend to have their volatility to the upside. This section also highlights the “inevitable,” as Covel calls it, with trend following – the drawdown, where we get this great quote from Harding:

“…Managers are obliged to wear their worst historical drawdown like a scarlet letter for the rest of their lives.”

There’s also this great chart in the performance section when talking about drawdowns, Trend following gets a bad rap, but is essentially no riskier in terms of drawdowns than many others. We wish he would have included Ackman and his Valeant trade in there.

Trend Following Ledgends Draw Downs

Next up, are analyses of “Big Events, Crashes, & Panics” such as the Dot.com bust, Great Recession, and Long Term Capital Mgmt., etc. We were disappointed not to see our chart included, but he tackles it more from a manager by manager perspective instead of via an index. It’s worth noting most authors would have led with this, whereas it’s merely another characteristic of trend following to Covel. Sort of like the gravy on top of the already well-structured investing thesis.

The rest of the book is a bit more entertaining, straying away from pure talk about trend following with a nicely done chapter on the explosion of sports analytics following Billy Beane, MoneyBall, and the obvious corollaries to a systematic mathematical approach to markets. He also takes on Nate Silver, CNBC pundits, Warren Buffet, and the stock market in general in the chapter “Holy Grails,” while exploring the mindset and decision making chops needed to succeed in trend following (it’s not natural behavior). He finishes with a few hundred pages of actual rules for building your own trend following system, manager interviews, and reams upon reams of trend following research charts, data, and tables. Much of this the expanded part!

We certainly learned a thing of two after giving the book another read. Whether you’re a newbie to Trend Following or live by the trend following rules religiously, Covel’s books are the definitive source on all things trend following – from the history of the method and the strategy rules to the emotions needed to stick to it and the legendary money makers who’ve plied this trade for decades. So no matter if you watch energy prices out of curiosity or invest millions in managed futures strategies, this is the book which will help you understand the who, why, and how prices and those investments following them may be moving the way they are. Grab your copy here!

Thanks!

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.

“Excellent work, excellent podcast…”

Posted on by Michael Covel

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Dear Michael Covel,

Thank you for your work. I recently found your podcast, and I’m listening to each one from the beginning, in chronological order.

So far I am up to number 28, Entrepreneurism: The Importance Of Not Doing What You’re Told.

Excellent work, excellent podcast.

Best wishes,
[Name]

Thanks!

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.