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Category: Trend Following

How to Start? There Are Many Answers!

Posted on by Michael Covel

A recent email exchange:

Covel: I see you posted an empty comment on my podcast. Questions for me?

Listener: I just purchased your book and was attempting to subscribe to your podcast sorry for the confusion. But, while you’re available, I would love to ask you a few questions. I just finished my Master’s at Harvard and have been trading on average 2,050 equity derivatives contracts per month for 3 years. I am an affiliate member of the MTA and have passed the CMT level 1& 2 and will be taking the level 3 in October. I have my first phone interview with the [Name] Group tomorrow and am committed to a life-long pursuit of being the best trader I can be. Would you have any advice for me? Thank you for your time Mr. Covel

Covel: What’s your goal?

Note: The best that I can be is a mirror. Most everyone knows their answer already. Accepting the answer is the hard part. This particular dialogue next went down the path of employee v. entrepreneur… Tough choices!

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.

Ep. 482: Two Takes with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Two Takes with Michael Covel on Trend Following Radio
Two Takes with Michael Covel on Trend Following Radio

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Please enjoy my monologue Two Takes with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive.

In this episode of Trend Following Radio:

  • The tulip bubble
  • March 2000
  • Fall of 2008
  • Financial instability hypothesis
  • Trend following philosophy
  • Behavioral economics

“The only way to eliminate market bubble’s and crashes is to eliminate people.” – Michael Covel

Mentions & Resources:

Listen to this episode:

Want to learn more Trend Following? Watch my video here.

Do You Have A Plan for When It Doesn’t Go Your Way?

Posted on by Michael Covel

Insights:

Through the gentle nudging of general manager Matt Millen — who was, in my opinion, one of the only stand-up guys in that organization — I spent a lot of time with a sports psychologist, trying to figure out how to get my confidence back. In the NFL (and especially at the quarterback position), if you don’t have confidence, you’re done.

There are 100 guys out there who can throw a comeback route, and 100 more who can throw a post. But there are only a handful of quarterbacks who can have the route picked off, then come back and throw it again. Who can get knocked down or get hit in the teeth … and throw it again.

That, to me, is the difference between making it to the NFL, and being great in the NFL.

I’m sometimes asked if I was put in an unfair position in Detroit. My answer is always immediate and the same: No. Saying so implies I was the only one in that kind of a position. Welcome to the NFL. Pick a year, and I’ll give you five guys who were in the same type of spot I was. For all of my prior success — all the balls I had bounce my way through college — I wasn’t prepared to deal with it when things no longer went my way.

If we’re being honest, not a lot of people are.

Trend following, take a loss.

Trend following, take a loss.

Trend following, take a loss.

Trend following, boom–winner.

More.

Source: Joey Harrington, Despite What You May Think, My NFL Career Was A Success. Sports Illustrated, December 21, 2015.

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.

Trend Following: “Speculation as a fine art…”

Posted on by Michael Covel

Dickson Watts a trend following father:

Before entering on our inquiry, before considering the rules of our art, we will examine the subject in the abstract. Is speculation right? It may be questioned, tried by the highest standards, whether any trade where an exact equivalent is not given can be right. But as society is now organized speculation seems a necessity.

Is there any difference between speculation and gambling? The terms are often used interchangeably, but speculation presupposes intellectual effort; gambling, blind chance. Accurately to define the two is difficult; all definitions are difficult. Wit and humor, for instance, can be defined; but notwithstanding the most subtle distinction, wit and humor blend, run into each other. This is true of speculation and gambling. The former has some of the elements of chance; the latter some of the elements of reason. We define as best we can. Speculation is a venture based upon calculation. Gambling is a venture without calculation. The law makes this distinction; it sustains speculation and condemns gambling.

All business is more or less speculation. The term speculation, however, is commonly restricted to business of exceptional uncertainty. The uninitiated believe that chance is so large a part of speculation that it is subject to no rules, is governed by no laws.

This is a serious error. We propose in this article to point out some of the laws in this realm. There is no royal road to success in speculation. We do not undertake, and it would be worse than folly to undertake, to show how money can be made. Those who make for themselves or others an infallible plan delude themselves and others. Our effort will be to set for the great underlying principles of the “art” the application of which must depend on circumstances, the time and the man. Let us first consider the qualities essential to the equipment of the speculator. We name them: Selfreliance, judgment, courage, prudence, pliability. 1. Self-Reliance. A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort. 2. Judgment. That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator. 3. Courage. That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau’s dictum: “Be bold, still be bold; always be bold.” [8]

4. Prudence. The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: “In meditation all dangers should be seen; in execution one, unless very formidable.” Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth; “Henceforth the very firstlings of my heart shall be the firstlings of my hand.” Think, act, promptly.

5. Pliability the ability to change an opinion, the power of revision. “He who observes,” says Emerson, “and observes again, is always formidable.”

With me?

You better be.

More.

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.

Ep. 481: Chris Zook Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Chris Zook
Chris Zook

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My guest today is Chris Zook, a business writer and partner at Bain & Company, leading its Global Strategy Practice. He is listed by The Times (London) as one of the world’s top 50 business thinkers. Zook received a B.A. in mathematics and economics from Williams College, a M.Phil. in economics from Exeter College, Oxford University, and a MPP and Ph.D in Public Policy Analysis from the Harvard Kennedy School. Zook is an author of books and articles on business strategy, growth, and the importance of leadership economics, including the Profit from the Core trilogy.

The topic is his book The Founder’s Mentality: How to Overcome the Predictable Crises of Growth.

In this episode of Trend Following Radio:

  • The founder’s 100
  • What keeps millennials in their jobs
  • Frontline obsession
  • Sense of insurgency
  • Owners mindset
  • Founders disease
  • Meritocracies

“Complexity is the silent killer of growth.” – Chris Zook

“Ideas are a dime a dozen. It comes down to execution and passion.” – Michael Covel

Mentions & Resources:

Listen to this episode:

Jump in!

“…We end up reinforcing the behavior patterns that aggravate the risk in the first place.”

Posted on by Michael Covel

Paul Volker gets it:

Larry summers, who would later serve as treasury secretary to bill Clinton and adviser to Barack Obama, had a theory. Technological and financial innovation, he told the group, had indeed made finance more bubble prone. He sketched out a scenario of how a crisis and deep recession could recur. Still, he concluded, since the Great Depression, the federal government had erected firewalls between the financial system and the real economy where ordinary people worked and invested: the vast federal budget, deposit insurance, and most important, an activist Federal Reserve: “it is now nearly inconceivable that there would be no active lender of last resort in time of crisis.”

The next panelist, Hyman Minsky, a professor at Washington University in St. Louis, for decades had flogged an iconoclastic theory of business cycles that fellow scholars had largely ignored. Since the 1960s, he said, the authorities had staved off another depression by reacting to every crisis with some combination of government borrowing and Federal Reserve lending. But each success, he warned, simply compounded the behavior that made the system crisis-prone. “Success is a transitory phenomenon,” he warned. He conceded, somewhat grudgingly, that “transitory” could last an awfully long time. It had been some fifty years since the last depression.

The last speaker on the panel was Paul Volcker, who had stepped down two years earlier as Fed chairman. He agreed with Summers that the world had more tools for dealing with crises. But his own take was closer to Minsky’s. He drew attention to a cartoon in that morning’s Boston Globe pegged to the Fed’s promise to pump money into the economy. It portrayed a dollar bill marked “United States of Amnesia.” “We seem to be on something of a hair trigger in using these tools,” he observed. “This leaves me with the disturbing question of whether by using these tools repeatedly and aggressively we end up reinforcing the behavior patterns that aggravate the risk in the first place.”

Trend following will be the winner next time. And next time. And next time…

Source: Greg Ip, “Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe.”

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.

AHL on Trend Following

Posted on by Michael Covel

Famed trend follower AHL:

The turn of the year is when traditional long only money managers state their predictions for the year ahead. Equity managers may be bullish if stocks are cheap or central bankers are expected to flood the markets with money, for example. Or they may be bearish if value is perceived the other way. It may not be an easy task, but the manager can generally make a guess based on a reasonably sound and intuitive argument. For a trend follower, however, it really is hard to answer the question in a manner that would satisfy most people.

The reason for this originates in how trend followers trade. The schematic below illustrates how trend followers are typically long when a market is rising and typically short when a market is falling. This is achieved through a systematic, non-discretionary process where computer algorithms analyse historic data in order to identify trends lasting anything from a few days to multiple months, with an average of around two months. Of course, individual markets may not trend all the time, so trend followers diversify by trading a wide variety of markets over many asset classes. The intention is that, as long as these markets are lowly correlated, the trend-following net is cast as wide as possible, and trends are captured wherever and whenever they occur. The technique is applied to the most liquid instruments available, meaning the strategy itself is highly liquid.

Bingo!

More.

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.