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Ep. 523: Tom Asacker Interview with Michael Covel on Trend Following Radio

Tom Asacker
Tom Asacker

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This is Tom Asacker’s second appearance on the show. His newest work is “I Am Keats: Escape Your Mind and Free Your Self.” The title of his book spawned from a conversation he had with a friend whose 20-something year old son was still living at home. Tom told his friend “Too bad we can’t wipe his memory clean and start over.” All actions come from your memory so Tom figured if he could wipe the 20 something’s memory clean, he could rewrite his life. After that conversation Tom had a sequence of serendipitous moments that lead to the writing of “I Am Keats.” Tom gives a unique perspective on the human condition that will no doubt give all listening something to think about.

Tom’s work allows people to think of themselves as being in a “mental cell,” to think clearly outside that, and learn how to make better decisions. There is a powerful misconception among people that they have a predisposed identity. Asacker says, “Who you are is what you create.” Just because you choose to go one direction, doesn’t mean that you won’t have some serendipitous event that changes your course of life. Just enjoy your journey, whether it is a journey full of struggle or journey full of success. The process is the goal, not where you think you are going to get to in the future.

There is no linear path to success and happiness. This illusion of stability causes people to wake up when they are 40 or 50 and think to themselves, “What happened with my life?” Life is not predetermined. It unfolds as you live it. What you do in the past sets you up for the future. How do you compete with the Steve Jobs of the world by staying in your office cube? Stop hedging your bets, and jump off the ledge.

In this episode of Trend Following Radio:

  • Taking a leap of faith
  • Traveling for the sake of traveling
  • Serendipity
  • Hypocrisy on the Internet
  • What are your “beliefs”
  • Cognitive dissonance
  • Being driven by inspiration vs. data
  • Bring the engineers in after you have the design

“People in general already believe that they are better and smarter than average. It is a cognitive bias called illusionary superiority and the internet is making this bias even more extreme. It is supercharging peoples pre-conceptions and solidifying their false assumptions.” – Tom Asacker

“I want life to be like an Easter egg hunt.” – Michael Covel

“You can’t create from data, you create from the soul.” – Tom Asacker

Mentions & Resources:

Listen to this episode:

Unlimited Power: Read It Please

Feedback in:

Hi Michael, I just wanted to say thank you for writing your books. I’ve read all of them so far except for Trend Commandments.

I am also writing to you for advice. You said, “if all you think you have to do to gain an audience with one of these legendary traders is write a letter, think again.” Or something to that effect. I guess my question is, how should one go about gaining an audience with a Jerry Parker or Salem Abraham? I am going to enter into a paper trading contest and the winner at the end will receive $10K. I am a recent college graduate with a mountain of debt already so winning this contest would be a huge first step on my (hopeful) trend following career. And getting an audience with one of these traders, and possibly gaining a mentor, would help make that happen.

In the midst of this crazy political climate, I have recently gone from neutral to very conservative. This was the first profound experience I had in recent months and discovering your books was the second. Because trend following and technical analysis perfectly resemble conservative beliefs. And fundamental analysis perfectly resembles liberal beliefs, which are both flawed at their core because they both place their faith in something that is fundamentally flawed, human emotion… I am very interested in meeting Jerry Parker one day to see what he thinks about this since he is a conservative. I am seeing so many parallels between politics and trend following. I’m curious to know what you think as well. Anyway, sorry for this small political rant. Thanks again, Michael. Any advice you have is greatly appreciated!

All the best,
[Name]

Please read Seth Godin’s Linchpin and Anthony Robbins’ Unlimited Power. Those books will put you in the right frame of mind to approach anyone.

The second one worked for me 100%.

Unlimited Power
Unlimited Power

JWH, Farming and Trend Following: New Trader Inspiration

Feedback in:

I just wanted to start off by saying thank you for making so many resources readily available to learn more about trend following trading.

I have been trading commodity futures for a little over 2 years now and have just recently (within the last 3 months) introduced to trend following trading. Trend following is the trading method that makes the most sense to me and the only method I can see leading to a lifetime of returns. Just recently started reading your Trend Following book and it is already resonating with me and enforcing the idea that this is the trading system for me.

I have also been an avid listener of your podcasts. Really enjoy that you dive in to more than just the trading systems themselves but rather how the individuals got their start and found trend following. I also am a fan of the podcasts that discuss the mental side of trading–the most important part.

One final question, from learning more about the trend following world have become interested in learning more about John W. Henry because like him I am a young farmer. Would ever be a guest on the podcast?

Thanks again and look forward to hearing from you.

[Name]

John W. Henry would be a great guest.

Starting Out: One Man’s Story

An excerpt from my book:

Even though he loved his job in the markets, David Druz soon entered medical school to hedge his bets. Medicine was interesting to him, but he was 100 percent fascinated with the markets. Did he have lots of money? No. The only money he had was $5,000 in stock that his father had given him. Druz cashed that out and put it into his account. At that same time the brokerage firm offered him a job, a full-time job to quit medical school and go work for them. They offered Druz $50,000 to start. That was really good money in the 1970s. A slightly drunk friend told him, “Dave, don’t take that job. You can be a really good trader, but if you take that job, you’ll never be a great trader. You’ve got to get a nest egg for security. You don’t want to trade with scared money. Finish medical school, be a doctor, and then you’ll be a great trader.” Does that make sense to you? Maybe not at first blush, but it was the wisest piece of information anyone ever told Druz. He has since seen many people over the years trading with scared money—meaning they would make decisions on the value of the money to them (read: emotional decisions about a new car, suit, or wife), and not follow the exact rules of their trading plan. “Don’t quit your day job” is another critical success lesson—write it down and tape it over your desk. Druz took his $5,000 and started to trade. He wasn’t very good at first, and his account dropped down to around $1,500. At that point he had hit rock bottom and trading success was beginning to move out of sight. He then received a message from his brokerage firm, “You got a fill on your trade.” Druz said, “I don’t have any orders in. I’m out of business.” The brokerage replied, “No, you had a ‘Good Til Cancelled’ order (GTC) in and it is ‘limit up’.” Druz was back in business! The universe apparently would not allow him to quit—he truly believed that. You too might think sometimes, “If I only had one more chance,” but when the next opportunity or chance does come around again you have to be willing to get in the game and play again—without thinking about your negative first experience. Second chances are telling you something. Heed their advice.

When the Trend Following Light Bulb Hits

Excerpts from nice feedback in tonight:

Michael, I want to thank you for pursuing your passion for trend following so tenaciously. I consider myself very new to the concept of trend following. I was first introduced to this style of trading and the story of the turtles traders in 2007 by a mentor of mine. I was 25 years old. At the time, I had become very interested in trading, stocks, and the allure of making money in the market. All the “knowledgeable and older” people I spoke to of this passion said there’s no such thing as fast money and it was best to stick with a buy and hold strategy. The message was, I should save 10% of my income and wait 40 years and I’d retire as a wealthy person. During this period, I read a few books on trading, mostly about using fundamental analysis and executing a buy and hold strategy to identify stocks with a high growth potential. I executed a few trades, made some money, lost some money and than walked away from trading believing it just wasn’t for me. I started funding my IRA and 401K using run of the mill mutual funds and put my active trading interest on hold. Fast forward to last summer, I am sitting in a tent in Kandahar, Afghanistan working for the U.S. Air Force. It’s the middle of the night and after reading on the Internet for days about trend following and the turtle traders story, I declared to a partner of mine. “I am going to teach myself how to trade.” He laughed at me and said you’ll likely lose all your money and for Gods sakes don’t buy some canned trading training program. He told me if your going to learn to trade, teach yourself, because that’s probable the only way that’s you’ll be successful. I thought it was good advice and I followed it. By the middle of the summer of 2012, I had become disgusted with the options I had for a executing a traditional buy and hold strategy. I had watched friends and family lose thousands of dollars in the 2008 crash, than gain some of it back, but at the same time, intuitively it didn’t seem right to me that I should be investing my hard earned money in mutual funds knowing those fund managers must be making millions on us “Joe Public”. Do they have my best interests in their hearts? What makes them smarter than me? How come it seems like the game everyone is playing is fixed? Additionally, I felt like having to be an expert in stock picking by reading companies balance sheets, or discerning broad trends, or by identifying hot market sectors through the news wasn’t going to work for me. I thought diversification only meant buying and holding different asset classes based on a defined time horizon. I didn’t understand what technical analysis was. By this time, I was trading here and there, but all the time, I felt like my activity was no better than guessing. I had no idea how much of an equity to buy, how long to hold, or what the function of a stop loss was. I didn’t understand the concept and application of trending following. I’d never heard of an automated trading system. Sitting in that tent, that very night, I went on Amazon bought 3 of your books, had them shipped to me in Afghanistan. I than began reading everything I could find on trending following, the turtle story and alternatives to discretionary trading. After I made this decision to teach myself to trade, it was as though something clicked in my mind. Ed Seykota says “intention = results”. Well I intended to learn to trade and I intended to use trending following as the vehicle. Thanks to the guidance, data, results, and discussions on trading software outlined in your books I’ve been able to make this happen. From your books, I’ve learned 90 percent of what I need to know about trend following and the rest was filled in by additional reading and through though trial and error. I kept thinking back to my past trading successes and failures, and realized I had been blindly making classic trading mistakes. After I made the decision to pursue developing an automated trending following system. I found the work in your books invaluable in solidifying and clearly defining a path to an alternative way of thinking and trading. Something about your descriptions of taking emotion out of the trading process was deeply appealing to my mind. Armed with all the evidence and knowledge from your work, I am now able to confidently say trend following is really the only method for trading that I can see will win in the long term. It was through your work that you lifted the val on this style of trading for me, and I’m sure, many other people like. In closing, I want to thank you for being so passionate about this style of trading. It comes through clearing in your books, on your websites, and in your podcast. Without your dedication and passion for trend trading, I wouldn’t be applying my own passion for being successful in my life. I just wanted to tell my story about teaching myself how to trade; going from zero to an active trading system by sheer determination with an intention to following a different path outlined through your work and others like you. Hopefully, I can endure the inevitable draw downs and second guessing that comes with trend following. Armed with the knowledge outlined in your work, I think I can.

Thanks,
Daniel

Winners just win. They want it. He wants it.

Recommended Reading and Posts

Table of contents for the Trend Following Book; FAQs round 2, Interview with Alison Gopnik, Buy and Hold Exit Strategy, Erik Wahl Podcast Interview.

“The podcasts help…to inspire, educate and reinvigorate my ‘animal spirits’ as I ride the bucking bronco each and every day.”

Feedback in:

Michael: I wanted to reiterate my ongoing appreciation for your passionate pursuit of trend following. The podcasts help a great deal and they serve to inspire, educate and reinvigorate my “animal spirits” as I ride the bucking bronco each and every day.

Recognizing a free market is not a free lunch, and that your generous and copious free content must be supported, I bought kindle versions of Trend Commandments and The Little Book during the past month. They occupy space with Reminiscences of a Stock Operator*, The Capitalist Spirit by Yale Hirsch and Morales & Kacher’s book Trade Like an O’Neil Disciple. (*The Jon Markman version is a great edition of this trading classic, offering deep historical context throughout the entire book.)

In fact, the very first kindle book I purchased was a new edition of Trend Following, putting the “smart” into my smart phone. 🙂

Whenever new editions come out, of course, they will be purchased.

It all began with email back in 2003 or so. That first tuition seemed “pricey” but I have made (and lost and made) multiples of that over time. The real tuition was the time spent putting the lessons into practice.

Thank you again for the spark, for I shall keep the fire burning bright and hot.

Best,

Edward

Thanks Edward!

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