Subscribe now and watch my free trend following VIDEO.

Category: Trend Following

An Odd Review

Posted on by Michael Covel

A recent 4 star review of my new edition of “Trend Following” that appeared at Amazon:

The Trend is Your Friend so says this author. But wait, a lot of smart people say trend following doesn’t work. Look, if this were easy we’d all be rich. When I picked this up the first thing I saw was a quote by Eric Hoffer ! Who ? He wrote The True Believer and other philosophical books. If you trade these markets I guess you better be philosophical. Anyway this is mostly about trend following in commodity and currency markets but most people trade stocks. In Appendix A I found “Trend Following For Stocks”. A test was run buying stocks that made an all time high using a loose stop loss method over several years that worked. Of course we know that running back tests really might not mean a whole lot when it comes to the future. Predicting that future is tough. Folks like Victor Niederhoffer (The Education of a Speculator and others) believe that things that worked in the past often don’t work in the future because of changing cycles. I learned that at the race track. Here’s the beef, when the cover states “Learn How To Make Millions In Up or Down Markets” a lot of credibility is lost. It makes a serious book sound like another get rich quick scheme.

My response? I am confused. You say: “…a lot of smart people say trend following doesn’t work…” Who exactly says this? Victor Niederhoffer? Did you read the section in the book about Niederhoffer? Did you see the performance data for trend followers in the book? Thanks for the taking time to read the book, I sincerely appreciate the time, but don’t be surprised when this author (me) calls out incorrect information. The biggest thing I have learned about the subject of trend following over the last decade is that so many people simply either can’t or won’t wrap their arms around it. I can understand that. For 25 years Wall Street has plowed millions upon millions of investors into buy and hold/mutual fund nonsense, and when that bubble burst, fear, confusion and debate are not surprising.

Lucky Survivors!

Posted on by Michael Covel

A critic has been on here recently with the argument, and I paraphrase, “trend followers are lucky survivors who were flipping coins with terrible Sharpe ratios who will soon blowup.”

His last post:

I’ve said it once and I’ll say it again. Risk is beta. Risk is the chance that you won’t meet your investment goals. The only way to quantify that in a portfolio is to use the long term variability in returns. You say Sharpe is bullshit because it penalizes good volatility, but the Sortino ratio fixes that. The Sortinos of trend followers are terrible. What else do I need to say?

This has been beat into the ground, but readers are free to comment. You too Geetesh Bhardwaj.

Note: one more post came in again after seeing above:

Let me guess Covel you had to look up Sortino ratio which is why you linked to it, right? My favorite part is that you won’t post what I write because you know it is entirely fact based and proves your trend following beliefs 100% wrong.

I do love it when the crazies think they have invalidated trend following technique and performance data. I saw these exact same accusations 15 years ago.