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Category: Psychology

Financial Literacy: Not on the Horizon

Posted on by Michael Covel

Just saw this headline and article from Associated Press:

New financial rules might not prevent next crisis. Sweeping financial overhaul will change many rules, but loopholes could allow another crisis.

When you read that you are left with one of two choices:

1. The author(s) have no idea what they are talking about.
2. The author(s) are purposefully not telling the truth.

Bubbles (read: “crisis”) are a part of human condition. They will never be eliminated. Government rules will NEVER keep human beings from building financial bubbles. Why is this such a simple concept to outline, but seemingly beyond the comprehension of all journalists?

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The Markets as ‘The Truman Show’

Posted on by Michael Covel

An excerpt I like:

“The Truman Show is a 1998 American comedy-drama…The film chronicles the life of a man who discovers he is living in a constructed reality soap opera, televised 24/7 to billions across the globe.”

Constructed reality soap opera? Our markets today!

Bottom line, from a trend trading perspective — price is king and follow it. But from a “what-the-hell-is-going-on-in-the-world-today” perspective — it is ‘The Truman Show’

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Transductive Reasoning

Posted on by Michael Covel

Feedback:

“Hi Michael, I’m sitting in a class on cognitive psychology and there is a term the professor has introduced called transductive reasoning. Here’s an example: A child hears a dog bark and then sees a train arrive. He concludes that the train comes because the dog barks. The professor told us that transductive reasoning is characteristic of children between 2 and 7 years of age. I think she could add economic and financial media blitz to her list.”

There are many to add to the list:

“Dow goes up. Economy must be improving!”

Reminds me of Pavlov. Or a little different?

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Who is John Galt?

Posted on by Michael Covel

Who is John Galt?

“Happiness is not to be achieved at the command of emotional whims. Happiness is not the satisfaction of whatever irrational wishes you might blindly attempt to indulge. Happiness is a state of non-contradictory joy—a joy without penalty or guilt, a joy that does not clash with any of your values and does not work for your own destruction, not the joy of escaping from your mind, but of using your mind’s fullest power, not the joy of faking reality, but of achieving values that are real, not the joy of a drunkard, but of a producer. Happiness is possible only to a rational man, the man who desires nothing but rational goals, seeks nothing but rational values and finds his joy in nothing but rational actions. Just as I support my life, neither by robbery nor alms, but by my own effort, so I do not seek to derive my happiness from the injury of the favor of others, but earn it by my own achievement. Just as I do not consider the pleasure of others as the goal of my life, so I do not consider my pleasure as the goal of the lives of others. Just as there are no contradictions in my values and no conflicts among my desires—so there are no victims and no conflicts of interest among rational men, men who do not desire the unearned and do not view one another with a cannibal’s lust, men who neither make sacrifices nor accept them. The symbol of all relationships among such men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot are traders, both in manner and spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder, or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtue, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the trader and held him in contempt, while honoring the beggars and the looters, have known the secret motive of the sneers: a trader is the entity they dread—a man of justice.”

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It’s Not How Good You Are, It’s How Good You Want to Be

Posted on by Michael Covel

To the trend following skeptics who have whined up a storm here in the last week, I offer a quotation from Paul Arden:

“Nearly all rich and powerful people are not notably talented, educated, charming, or good-looking. They become rich and powerful by wanting to be rich and powerful. Your vision of where or who you want to be is the greatest asset you have. Without a goal it’s difficult to score.”

I bet there are some people who have arguments why that is not true!

Let me take it a step further with controversial Mark Cuban:

“With every effort, I learned a lot. With every mistake and failure, not only mine, but of those around me, I learned what not to do. I also got to study the success of those I did business with as well. I had more than a healthy dose of fear, and an unlimited amount of hope, and more importantly, no limit on time and effort…The point of all this is that it doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and either should you. All you have to do is learn from them and those around you because all that matters in business is that you get it right once. Then everyone can tell you how lucky you are.”

Larry Hite extends:

“Most of the Ivy League guys I know are so used to being ‘right’ they get very uncomfortable dealing with uncertainty – when there is no right answer. Their ego often makes them so afraid of being ‘wrong’, that they’re unable to make good bets. They are not comfortable with the idea of risk, because they don’t know how to assess it or measure it. [They have been] taught to absorb knowledge, not what to do with it.”

And Hite takes brings it home with even more clarity:

“There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future. You can also lose a good bet, but if you keep placing good bets, over time, the law of averages will be working for you.”

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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.

Harvard Poker Pro Says Texas Hold ‘Em Can Teach Traders to Fold

Posted on by Michael Covel

From Bloomberg:

“Someone who has made a successful living as a poker player for a few years would more likely be a good trader than someone who hasn’t,” said Aaron Brown, a 53-year-old former poker pro who is now a risk manager at AQR Capital Management LLC in Greenwich, Connecticut, which oversees $23 billion. “They know to push when they have the edge and they know how not to bust, and that’s a tough combination to find.”

Thinking in odds is a crucial point of my film.

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.

No Way Covel! Yes, Way!

Posted on by Michael Covel

I saw this:

This actually would be my one and only criticism of Covel. He makes it sound like ANYBODY can successfully create and follow a mechanical system and make money like clockwork. IMO most people are not cut out for it…The amount of discipline required is zen-like.

First, putting aside ‘trend following’, and just considering any worthwhile endeavor, people CAN & DO make anything happen in life. The Talent Code and Talent is Overrated both make a strong case against this position. Second, my book The Complete TurtleTrader is an even better response to the “everyone can’t do it” line. The story of how an actor, a musician, a drug dealer, blackjack players — novices — made millions is inspirational. I am the first one to say that the Turtle story almost seems like fiction, but it’s not.

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 Podcast Guests
• Frequently Asked Questions
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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.