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Ep. 380: Lessons from Ken Tropin with Michael Covel on Trend Following Radio

Ken Tropin
Ken Tropin

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On today’s show, Michael Covel talks about how people that are ahead of the curve often find themselves isolated – even ridiculed – by those who don’t yet get it. This, as Michael points out, is certainly true for trend following traders, and some of the sharpest push back comes from the talking heads of the media.

To emphasize his point, Michael plays clips from an interview between CNBC’s Joe Kernen and Graham Capital’s Ken Tropin, a highly successful trader who heavily incorporates trend following techniques into his overall strategy. To Michael, of utmost significance in the two men’s exchange, is the fact that Kernen bumbles through the interview wholly unprepared (either via incompetence or on purpose). Kernen didn’t respect Tropin or his strategy enough to do even the most basic homework beforehand.

Michael’s discussion then moves on to the topic of uncertainty. In direct opposition to media personalities, that are paid to pretend to know what the market will do, trend following traders embrace the knowledge that they can’t predict the future. Uncertainty makes the game more exciting, and not just the investment game. As Michael demonstrates, the principles of trend following can be effectively applied across myriad disciplines.

In this episode of Trend Following Radio:

  • Recognizing that without a strategy, you’re at the mercy of the machine
  • Embracing uncertainty
  • Understanding that knowing every market move won’t help without a plan
  • The importance of setting your strategy beforehand
  • Seeing that media personalities are paid to pretend to know all
  • How the principles of trend following apply to other disciplines

“Trend following is one of the most mature and well-established systematic trading styles with a thirty-three year track record of profitability.” – Ken Tropin

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Ep. 378: Embracing Failure with Michael Covel on Trend Following Radio

Embracing Failure with Michael Covel on Trend Following Radio
Embracing Failure with Michael Covel on Trend Following Radio

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On today’s show Michael Covel vents some of the frustration he’s been feeling over the past few weeks. Central to his discussion is the idea of failure, and how the vast majority of people are unable – or unwilling – to accept how vital it is to overall long-term success.

Michael opens by pointing out that most people today seem to be under the delusion that someone will always be there to take care of them. This, as Michael explains, is by design. Government and the talking heads of the media want the average citizen to be soft, dependent, and unwilling to take risks. Safety and security, according to the official line, should be valued above all else (even if it is all an illusion).

But this line of thinking doesn’t account for the truly successful of the world. Those who’ve risked everything and succeeded – specifically because they failed and learned from their mistakes. Success requires tenacity and dedication, but neither are required if you don’t take a risk in the first place. Because if you never take a shot, you’ll never hit the target.

In this episode of Trend Following Radio:

  • Understanding that success requires failure
  • Seeing past investment myths
  • Recognizing that no risk means no profits
  • Understanding that there’s no such thing as a perfect strategy
  • Shattering the notion that someone will always take care of you
  • Accepting that there are no guarantees

“I’ve failed over and over and over again in my life. And that is why I succeed.” – Michael Jordan

Mentions & Resources:

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“Improve Our Odds While Controlling the Risk”

Feedback in:

Hi Michael,

I have read one of your books, bought your movie, “/broke/”, from Amazon.com, and have been a podcast listener/fan for over 2 years now. I am a William O’Neill-style, long [term] stock trader, but as a computer programmer and system architect by trade, I am refining my own trading style on more of a trend following rooted philosophy. That is why I cannot stop listening to your podcast. It is great from your insight/commentary to the top-notch and interesting guests that you showcase! I would say it rivals the quality of TED Talks for me.

Anyway, I appreciate you making this information available so those traders like me can continue to learn and improve our odds while controlling the risk. Take care!

Sincerely,
[Name]

Thanks for the nice words.

The Truth: A Two-Edged Sword

The truth is, almost everything about superior investing is a two-edged sword:

-If you invest, you will lose money if the market declines.
-If you don’t invest, you will miss out on gains if the market rises.

-Market timing will add value if it can be done right.
-Buy-and-hold will produce better results if timing can’t be done right.

-Aggressiveness will help when the market rises but hurt when it falls.
-Defensiveness will help when the market falls but hurt when it rises.

-If you concentrate your portfolio, your mistakes will kill you.
-If you diversify, the payoff from your successes will be diminished.

-If you employ leverage, your successes will be magnified.
-If you employ leverage, your mistakes will be magnified.

HT Howard Marks.

More on stretching the truth.

Ep. 345: Spyros Makridakis Interview with Michael Covel on Trend Following Radio

Spyros Makridakis
Spyros Makridakis

Michael Covel speaks with Spyros Makridakis on the show today. Makridakis is the Rector of the Neapolis University of Pafos NUP and an Emeritus Professor of Decision Sciences at INSEAD as well as the University of Piraeus and one of the world’s leading experts on forecasting, with many journal articles and books on the subject. He is famous as the organizer of the Makridakis Competitions, known in the forecasting literature as the M-Competitions. His calling is to poke holes in the notion that we can forecast with accuracy. Covel and Makridakis discuss known knowns, known unknowns, and unknown unknowns; the two main types of uncertainty–“subway” and “coconut”; Jim Collins, one of the best-selling business book authors of all time, and why it might not have any use to us; medicine and chance; the placebo effect; acceptance of an uncertain world; and the illusion of control. Whitepapers mentioned in episode: https://www.trendfollowing.com/2015/04/23/spyros-makridakis-interview-followup.

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Ep. 342: Victor Ricciardi Interview with Michael Covel on Trend Following Radio

Victor Ricciardi
Victor Ricciardi

Michael Covel speaks with Victor Ricciardi on today’s episode of the podcast. Victor Ricciardi is an Assistant Professor of Financial Management at Goucher College. Professor Ricciardi is a leading expert on the academic literature and emerging research issues in behavioral finance. He is the editor of several eJournals distributed by the Social Science Research Network (SSRN). Ricciardi is also the co-editor of the book Investor Behavior: The Psychology of Financial Planning and Investing. Covel and Ricciardi discuss how Ricciardi found his way into behavioral finance; risk perception vs. risk tolerance; the affect and the anchoring heuristic; behavioral finance vs. behavioral economics; looking at behavioral finance in the context of specific strategies; behavioral economics in the context of asset bubbles and the popping of asset bubbles; why economic growth does not increase happiness; mindfulness as an assist in the notion of good decision-making; the notion of animal spirits; and the behavioral school vs. the classical school in academia.

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Ep. 341: Michael Dever Interview with Michael Covel on Trend Following Radio

Michael Dever
Michael Dever

Michael Covel speaks with Michael Dever on his third appearance to the podcast. Dever is an American businessman, futures trader, entrepreneur, and author. Dever is the founder and CEO of Brandywine Asset Management, Inc., an investment management firm founded in 1982, and the author of the best-selling investment book Jackass Investing: Don’t Do It. Profit From It. Covel and Dever discuss Dever’s approach which uses multiple fundamentally based strategies in a systematic diversified portfolio that trades across more than one hundred global markets; strategy diversification; the word “predictable” from Dever’s perspective; lack of correlation to other strategies; what Dever means by a “not purely quantitative” strategy; how and why this particular suite of strategies came to exist; the five strategy types; crisis events and black swans; the weakness in the multiple strategy return driver set; the importance of speculators; the fixation on low volatility strategies; and true portfolio diversification. For more information on Michael Dever, visit Brandywine.com.

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