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Tag: markets

Markets: They Trend, They Flow, They Surprise

Posted on by Michael Covel

Chapter taken from “Trend Commandments”:

Markets go up, down, and sideways. They trend. They flow. They surprise. Have markets changed? Not only have markets changed, they will continue to change. Check your history books. If you have a valid market philosophy, learning to accept that change and flow with it is your greatest asset. No matter how ridiculous market moves appear at the beginning, and no matter how extended or irrational they seem at the end, following trends is the rational choice in a chaotic, changing world.

That thinking leaves trend followers as generalists when it comes to their trading strategy and that’s not easy to accept for many. The dominant trend within universities is ever-narrower specialization. A higher premium is placed on deep knowledge within a single field (read: fundamental expertise in one market), versus broad wisdom across multiple fronts.

For example, one trend following practitioner started trading trends in 1974—making hundreds of millions in profits and perhaps billions for clients. The major strategic elements of his trend following trading systems have never changed. He was blunt: “The markets are just the markets. I know that is unusual sounding.”

Occasionally, someone trying to promote something or start a debate will argue that trend following has to change due to changing market conditions. Specious. The root of trend following is based on responding to change. It is designed to be adaptable.

Does that mean every systematic trend trader will take the risk of shooting only for huge returns? No. Does that mean every trend trader will capture a trend in the exact same way? No. The trend following way has many practitioners and many recipes. However, just as there are thousands of car models, they are still cars.

Think about my words.

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
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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.

Rational Logic Means Nothing in the Markets

Posted on by Michael Covel

Greenspan speaks to how irrational markets can be:

Michael, Thanks for making all of your podcasts available to the public. Please keep up the good work. I thought you might find the quote below from Alan Greenspan of interest. It’s from a 10/26/13 interview with the FT entitled “Crash Course”:

“…He [Greenspan] admits that he first saw how irrational finance could become as long ago as the 1950s and 1960s when he briefly tried, as a young New York economist, to trade commodity markets. Back then he thought he could predict cotton values ‘from the outside, looking at supply-demand forces’. But when he actually ‘bought a seat in the market and did a lot of trading’, he discovered that rational logic did not always rule. ‘There were a couple of guys in the exchange who couldn’t tell a hide from copper sheeting but they made a lot of money. Why? They weren’t trading a commodity but human nature…and there is something about human nature which is not rational‘…”

Best,
L.W.

Trend following foundational point #1,232,980.

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.

A Great Example of How Too Much Protection Delivers Chaos — Either for Kids or Markets

Posted on by Michael Covel

Many think markets can be made safe. They truly believe there is a way to predict tomorrow and thus watch their accounts go straight up over time. Once all of the nasty unsafe stuff is cut, life becomes roses. A great example of the desire for ultimate protection can be seen in the ban of these stamps by the United States Post Office:

“With the Just Move! stamp issuance the U.S. Postal Service hoped to raise awareness about the importance of physical activity in achieving a healthy lifestyle. However, according to Linns Stamp News, the USPS will be destroying the entire press run after receiving concerns from the President’s Council on Fitness, Sports & Nutrition over alleged “unsafe” acts depicted on three of the stamps (cannonball dive, skateboarding without kneepads and a headstand without a helmet). (There’s also a batter without a batting helmet, a girl balancing on a slippery rock, and a soccer player without kneepads or shin pads.)”

Here they are:

Beam me up!

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.

Government, Markets and Media Propaganda

Posted on by Michael Covel

Feedback from Australia:

G’day Michael, I have recently discovered your podcasts, am awaiting your DVD, have signed up to your e-mailing list and have just brought one of your books. I’ve already had one of those ” ah-ha” moments, whilst listening to a podcast, and can’t wait now to sink my teeth into one of your books. Thought you might find this next bit amusing, we’ve just had the election here in Australia, and have a guess what all the media outlets are blaming for the so called “sharp rise” in the market. Of course you got it right, a change in Government. Gee haven’t heard that one before! Thought you might like the giggle factor in that one. Thanks again for helping me in gaining the momentum to get the education I’ve been looking for. Much appreciated.

Kind Regards,
Guy

Thanks Guy!

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.

Diversification is Key to Trend Following

Posted on by Michael Covel

Feedback:

Hey Mike, I was thinking about your recent podcast where you talked about how the sharks were posting Bill Dunn’s worst years to demonstrate the failure of trading. It reminded me of the recent articles on John Paulson. You may have read that his gold fund is doing horribly this year. Down 65%. Just like with Bill Dunn, people who don’t understand trading are just salivating over this demonstration of the “failure of trading”. The fund only represents 2% of Paulson’s funds. If this fund operates totally independently of his others funds then I might be inclined to agree with some of the criticism Mike. I can’t understand how any professional trader of Paulson’s caliber could allow his fund to lose 65% of assets. Also, I can’t understand why any professional trader could have looked at a gold chart for the past few years and decide to go long which is the only way that I can imagine that he could be down 65%. If he does incorporate counter trending strategies and was long then I don’t understand why his stops didn’t prevent such a massive loss. On the other hand Mike, if this fund does not operate totally independent, but operates as part of all of his assets, then my view would be totally different. A 2% investment of total funds under management while a bit high, is not a totally unreasonable amount for a professional to risk on a trade. Furthermore if that is the case, just think about it Mike. A 65% unrealized loss on a particular trade means you’re still in the trade. We are actually willing to risk 100% of the 1% or so that we risk on each trade. I don’t think some people realize that. If you have $100,000 trading account and you risk $1000, 65% down in that trade means you are still in the trade. The trade doesn’t end until you either get stopped at a 100% loss of the $1,000 or you take profits of 2:1 or 3:1 on that trade. Some people don’t seem to realize that about trading.

Confusion here.

65% loss on one market is not trend following! Where is the cutting of loss? Dunn’s drawdown was from taking many small losses across many markets. They add up. No one drop on one market. Plus there really can’t be a trend following fund on one market alone. That means no diversification and that is a recipe for failure.

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. 103: Playing the Game with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Playing the Game with Michael Covel on Trend Following Radio
Playing the Game with Michael Covel on Trend Following Radio

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

Listen to this episode:

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

How I Look At The Markets

Posted on by Michael Covel

The markets are a science. Plain and simple. Some like to look at fundamentals and guess what will happen next. I like to look at the numbers. The facts. The only thing you can trust. Billion dollar hedge fund manager David Harding views the markets similarly:

Our approach to markets is a science. It is an unpublished science, but it is a real one. You would have thick leather-bound volumes of papers on it if there were a willingness to “open the kimono,” as the horrible modern expression has it. The process of trading our system is like repeatedly drawing different colored balls from the statistician’s apocryphal bag. As we draw out a ball it becomes part of the track record, and we put it back in the bag, but there is no guarantee that the balls will come out in the same order in the future.

Trend following is speculation in its purest form–find an edge and exploit it consistently over time. That attitude is critical for any entrepreneurial success. Throw the lottery mentality away. Forget the one hit wonder luck the press propagates to the masses of lemmings. Learn the real way to profit that goes against buy and hold (hope).

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.