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Category: Feedback

Should You Jump or Not? Some Good Thinking

Posted on by Michael Covel

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Hey Mike:

I’ve been trading on and off for about 20 years but I finally have created a fully back tested system that I’m really happy with. I’m thinking of becoming a full-time trader and quitting my job to be fully focused on getting consistently competent. As my system only works on daily price I only really need about 30 minutes a day to execute my scan and trade. I’m thinking of getting a part-time but I’m worried that this will take from my focus. Before I had my current job for the past year I was self employed in retail and hospitality for 15 years so I have an understanding of being an entrepreneur however I feel that having these businesses and trading at the same time is the reason I haven’t been able to get it right.

Would love your thoughts.

Cheers
[Name]

Asking if you should jump or not?

Read:

Or this by me:

Enjoy!

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Jim O’Shaughnessy: Successful Active Stock Investing is Hard

Posted on by Michael Covel

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Mike,

I know this is outside your strategy space, but the psychology behind this post from Jim O’Shaughnessy is fantastic.

Hope you enjoy,
[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.

Famous Last Words: “No One Saw it Coming!”

Posted on by Michael Covel

Feedback in:

Michael,

I just wanted to take a moment to thank you for your work. I have read most of your books and they are exactly what I needed.

You see I am a veteran of the brokerage business (30 Years) and I have always known intuitively that something about the entire business was, and is, a lie. Analysts have no skin in the game, management doesn’t care if you make money, it’s all about assets under management that’s why they will never say sell. “Just buy more.”

You see I used to look at CFA’s as the smartest people in the room. Now I know that they are really just financial weathermen trying to predict the future. Something that can’t be done.

I have adopted for my clients a simple trend following rules based strategy, and it amazes me how hard it is to change minds. It is so simple they somehow think it can’t work. But I will keep plugging away and I know you will to.

The business needs to change even the other brokers in my office look at me like a freak when I tell them to stop listening to analyst’s and “stop buying stocks that are going down.” Old habits die very,very hard.

Just wanted to say thanks.

[Name]

The same listener wrote back the other day, almost a year later:

Michael,

As you can see we have corresponded before. I just wanted to drop you a line to tell you just how bad it is out here. As I mentioned previously I have 30 years under my belt in the brokerage business, but only in the last four or five have embraced rules based trend following.

Happily my clients that will listen with an open mind almost always say the method makes perfect sense. The problem lies with the people I work with, when I talk about having rules, following them, and being completely agnostic about what you own just make sure that what you own is going up they look at me like I have two heads. Like it is a cute parlor trick but could never work long term. Then I prove to them how much better off they and their clients would be if they would only have rules to sell what is going against them they shake their heads, agree, and forget everything I said.

My point is keep pushing these concepts when it hits the fan one of these days people are going to be destroyed because they won’t sell anything. And all my peers will be sitting with clients apologizing for not protecting the down side and saying, “No one saw it coming.” To which I will respond, “It wouldn’t matter if you had rules for selling.”

Keep it up, these ideas can change lives.

[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
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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.

“Sound capital management best practices…”

Posted on by Michael Covel

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Michael,

Before stating this, I’ll say that I’m a person who has always been buy and hold, and does NOT mind drawdowns. I lived through Black Monday, the Internet bubble, and the financial crisis, and generally just bought more when I thought things were getting near their lows (kind of a trend strategy in itself). I never sold and was happy that things were finally getting cheaper. The market has rebounded every time, and I’ve been fortunate to make what I lost and more.

Having said that, today I placed my first trend-based (price only, systematic decision) orders today with lot sizes based upon a defined and more than acceptable risk, and with trailing stops based upon volatility. There was something quite comforting about having a defined maximum risk, I must say. Also, I placed trailing stops on several other positions in my account as a function of volatility as well. All thanks to techniques I picked up from your show.

I think it was James Rohrbach (episode 17) who first caught my attention with a simple question when talking about the market. He mentioned, with respect to buy and hold, something to the effect that after a large drawdown, the market may very well come back. As true as that may be, he asked, “Is sitting through that drawdown the smart thing to do?”

Some of the trend stuff, such as intelligent bet sizing, risk management, etc., is more than just trend following. It just makes sense as sound capital management best practices. Thanks for spreading the word.

Cheers,
[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.

“It reminded me of another Singaporean anecdote…”

Posted on by Michael Covel

Feedback in:

Mike…

I loved your story about being recognized by a Singaporean cab driver. It reminded me of another Singaporean anecdote I thought you might appreciate.

I’ve been living in Bangkok for the last ten years and don’t really get out much. But I was in Singapore maybe four or five years ago on a brief visit with a friend who’s quite familiar with that city.

Knowing how much I love books, he took me to a gigantic book store. Place seemed like it was a block long. Easily ten times bigger than any bookstore I’ve ever been in. I had heard some very positive things about your trend following book from a 4X trader. So I walked right up to an employee at the bookstore and asked if they carried your Trend Following book. Guy went right to a computer and twenty seconds later his head pops up. “Yes sir. We have it here.”

And it was in my hands a few minutes later. As I recall, it was quite a walk from where we were in the store!

I don’t know the name of that store. But the next time you’re in Singapore, maybe Rogers knows!

Glad you’re digging Asia. It changes you. It’s all happening here. North America and Europe are comatose in comparison. I don’t think I could live there anymore, anyway. Too many rules!

Appreciate all your contributions. Even if you totally walked away from the podcast, don’t worry about it. You’ve already done plenty. Take care of yourself first with whatever you need and the rest will take care of itself.

Peace out…
[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.

Where is the Exit Strategy with Buy and Hold?

Posted on by Michael Covel

Feedback in:

Michael,

I’ve been listening to your podcast and really enjoy it. Thank you for bringing different perspectives on investing, and for all the trend followers you interview who are candid about their processes, advantages, and disadvantages. I really enjoy all the interviews, especially those with Jerry Parker.

I’ve got a question: You disparage buy and hold, but is it the same thing as trend following? Charles Dow (in my mind) is the inventor of trend following. He defined primary trends, that could not be manipulated, secondary trends that could be manipulated, and shorter term trends (daily) that are generally random.

When you think about it, buy and hold (in equities) is just a bet on the longest of primary trends, namely, that the market goes up and down, but it goes up more than it goes down. It is divorced from any fundamental analysis, and has a clear entry and exit points: buy when you have funds throughout your working career and sell when you need money for retirement.

Sure, it has more volatility and drawdowns than something like the turtle strategy, but it has bigger gains at times too – trend following can’t match the gains in large bull markets. Thus, a buy and hold person subjects themselves to more volatility and drawdowns to follow a long-term (and hopefully more lucrative) trend, while a Turtle uses systematic trading rules to trade on the shorter – akin to Dow’s “secondary” – trends to reduce volatility and drawdowns, sometimes at the loss of gain but likely with superior preservation of capital.

The only difference is the length of trend one wants to follow. Otherwise, they’re effectively the same. Entry and exit rules, no fundamentals, seeking to ride a trend.

Agree?

Thanks for keeping the trend following torch burning. Keep up the good work!

Cheers,
[Name]

Where is the exit strategy with buy hold?

Pretty big issue to leave out if making the comparison to trend following.

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.

“Nate Silver was by far the most accurate forecaster in the 2016 election”

Posted on by Michael Covel

Feedback in:

Nate Silver [my article that generated the feedback] was by far the most accurate forecaster in the 2016 election.

While most modelers pegged Clinton’s chances at greater than 90% (in some cases 99%), Silver had Trump as a 35.2% chance few days before the election. That was pretty darn good handicapping.

You are confusing prediction with handicapping, which is surprising given how much you have talked about poker and probabilities and black swans. If I were grading Nate Silver, I would give him an A+, because that is the grade he earned. I even heard him talk about the possibility of systemic failure in polling and got ridiculed.

What’s the point of his kind of political analysis? The usefulness? There is none. The vast majority of people (who know of him) think he has some predictive up or down power. That’s what he wants (likes), even if not accurate. Then people in the weeds can show up to say “oh no you missed his point, it’s his great handicapping skill.” Yeah, I see how clever this mathturbation is.

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.