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Tag: books

Austrian School and Trend Following

Posted on by Michael Covel

Feedback in:

Mr. Covel, I am currently reading “Capital and Its Structure” by Ludwig Lachmann. Lachmann was an Austrian School economist who studied under Hayek at LSE in the 1930s. This book is one of the seminal works on Austrian capital theory. Towards the end of the second chapter, Lachmann develops the concept of “meaningful” and “meaningless” price movements and links them to random and permanent economic forces. He then gives an example. Lachmann’s treatment of his idea in the example is essentially a Nicholas Darvas box theory, breakout, trend following description of price movements in the economy. Lachmann is not referring to stock or commodity prices per say, but upon reading his example I immediately linked it with trend following. The relevant passage can be found here, starting on p. 30 (p. 40 of the PDF version of the book).
Sincerely,
Augustus Van Dusen

Nice find!

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Risk Management, Stops, Exits, Losers and Winners

Posted on by Michael Covel

Feedback in:

Hello Michael, thanks for accepting my friend inquiry. First, I want to say that I am a big fan of your podcast and interviews. Really great stuff. About myself? I have traded for 5 years, but have not traded profitably. I think my largest hurdle is not holding onto the winners. I do not give my entries enough room. Therefore I keep my losers very short, but very often see the position run after stopped out. In a nutshell my strategy is to move the stop to the entry point as soon as the position has a little bit of room. But so many times the position turns around just to touch my stop and then move on. Do you have any advice for me? Would you say that’s just risk management and part of the business? Because I think I miss too many good trades with this strategy. Thanks a lot in advance and have a nice time in Asia.

Frank

My first advice would be to read one of my books. Not a dodge to your question, but my books are filled with the necessary detail not easily put in one email response.

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.

Manage Your Money or Someone Else Can

Posted on by Michael Covel

Not interested in trading your own money? There are plenty of trend following firms out there to choose from. Some feedback:

I’m reading your book Trend Following, and I’m a believer. I’m not interested in becoming an expert. I would rather have someone do the investing for me, but I don’t see on the website any links for investors who want someone else to manage their funds. Have you got any options for me?

Thanks,
David

My five books are filled with ideas for those who might manage your money. I am not currently in the recommendation game.

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
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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. 7: Mike Shannon Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Michael Shannon
Michael Shannon

My guests today are Michael Shannon and Jim Byers.

Shannon, an original Turtle trader trained by Richard Dennis. He was featured in Michael Covel’s The Complete TurtleTrader.

Byers is a trader and investor. In the 2006-2008 period, Byers started studying trend following; since then, he’s started a fund with his partner, Todd Miller.

The topics are the Turtle story and Trend Following.

In this episode of Trend Following Radio we discuss:

  • Shannon’s experience in the Turtle program with Richard Dennis and William Eckhardt
  • Historical insights and anecdotes regarding the legendary Turtle story
  • Shannon’s unlikely background
  • The personalities of Dennis and Eckhardt
  • Why Turtles with outsider backgrounds were generally more successful; and whether or not Dennis and Eckhardt were inspired by the film, “Trading Places”
  • How trend following can still be a winning game even if you aren’t right the majority of the time
  • More in depth “light bulb” moments that Byers has had since taking up trend following

Listen to this episode:

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Trend Follower David Druz on Systems

Posted on by Michael Covel

From The Little Book of Trading trend follower David Druz has a plan:

Once a system’s algorithms and parameters are established, the system must be followed exactly and religiously. A system cannot be second-guessed or used intermittently. Values of variables cannot be altered. Parameters cannot be arbitrarily changed. A robust system works over many types of market conditions and over many timeframes. It works in German Bund futures and it works in wheat. It works when tested over 1950-1960 or over 1990-2000. Robust systems tend to be designed around successful trading tactics not designed around specific types of markets or market action. And here is the amazing thing about robust systems: The more robust a system, the more volatile it tends to be! Druz gives this advice: “There are whole families of trend trading ideas that seem to work forever on any market. The down side is they are very volatile because they are never curve-fit. They’re never exactly fit to any particular market or market condition. But over the long run, they do extract money from the market. You want to be focused on how you divvied up the risk in your portfolio, how much risk you take in each market, how many contracts you trade in each market, that’s the stuff that really counts…if you have money management wired, you can let volatility go because you know it doesn’t have any correlation with the risk of ruin. You can use volatility to your advantage.”

Wise.

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.

“Play Calling Is About Probability, Not Certainty”

Posted on by Michael Covel

Take two traders who win 40 percent of the time with their winners being three times as large as their losers. One has a history of 1,000 trades and the other has a history of 10 trades. Who has a better chance in the next 10 trades to have only 10 percent of their total trades end up winners instead of the typical 40 percent? The one with the 10–trade history has the better chance. Why? The more trades in a history, the greater the probability of averages holding true. The fewer trades, the greater the probability of moving away from the average.

Consider a friend who receives a stock tip, makes some quick money, and tells everyone about it. There is a big problem with this scenario. His population of winning tips is extremely small–one to be exact. That’s statistically insignificant. He could just as easily follow his next hot tip and lose all of his money. One tip means nothing. The sample is essentially anecdotal evidence.

Thinking in terms of statistics is everywhere if you are observant. During a Monday Night Football game, one of the announcers, Ron Jaworski, put numbers and odds in perspective for playing the game of football: “Play calling is about probability, not certainty.”

It is the same in trend following trading.

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
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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.

Philosophical Matrix: Trend Commandments

Posted on by Michael Covel

D. Buxman writes about Trend Commandments:

“What was missing for me was a philosophical matrix within which I could construct more meaningful rules upon which I could base my personal Trend Following system.”

I like that descriptor–philosophical matrix.

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.