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Tag: michael covel

Transductive Reasoning

Posted on by Michael Covel

Feedback:

“Hi Michael, I’m sitting in a class on cognitive psychology and there is a term the professor has introduced called transductive reasoning. Here’s an example: A child hears a dog bark and then sees a train arrive. He concludes that the train comes because the dog barks. The professor told us that transductive reasoning is characteristic of children between 2 and 7 years of age. I think she could add economic and financial media blitz to her list.”

There are many to add to the list:

“Dow goes up. Economy must be improving!”

Reminds me of Pavlov. Or a little different?

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Close Enough to the North Pole

Posted on by Michael Covel

An excerpt from my Turtle book that I like:

No matter what ‘price’ is the variable that the great traders have lived and died by for decades. Making trading decisions more complicated than the simple heuristic of ‘price’ has always been problematic. Eckhardt knew it was hard to do much better: “Pure price systems are close enough to the North Pole that any departure tends to bring you farther south.”

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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.

Michael Covel Meets Mikhail Gorbachev: The Digging Story

Posted on by Michael Covel

michael covel

An excerpt from my book The Complete TurtleTrader:

Taking very little at face value is my modus operandi. In fact, since childhood I’ve challenged the accepted norms regarding access to the truth. Along the way I’ve challenged a number of people who have wanted to keep the curtains closed. In this small world, one of the more unlikely people to have asked me, “How do you go about unearthing details?” was Mikhail Gorbachev.

The former president had been told in Russian that I write about men who trade big money, so when we were introduced he asked me in Russian, “What is it like to write about these men?” Realizing his time was limited, I kept it short: “Very interesting.” He waited for the translation. “It must be difficult to get behind the scenes; how do you do it?” I smiled, “Oh, I am very good at digging.” He laughed. No translation needed there. He understood my English perfectly.

Walking into the world of Turtles was not planned. It was an unconventional journey. Spring 1994 was the “get your act together, now is the time” year for me. I had just finished an MBA at Florida State, having spent my final semester in London studying international relations.

Back in the States, armed with the so-called prerequisite advanced degree and a deep desire to become rich, Wall Street called. Unfortunately, Virginia, my home state, was not the place to start looking for a mentor or an opportunity that would lead to big money. Most of my friends were products of government workers, not the types looking beyond security or “fitting in.”

So, I tracked down one of the few Florida State alums on Wall Street, recently retired James Massey. He had made millions at Salomon Brothers and was memorably portrayed in Michael Lewis’s classic Liar’s Poker:

[Jim] Massey…was John Gutfreund’s (the then CEO) hatchet man, an American corporate Odd Job. It didn’t require a triple jump of the imagination to picture him decapitating insolent trainees with a razor-edged bowler hat. He had what some people might consider an image problem: he never smiled…Trainees feared Massey. He seemed to prefer it that way.”

At lunch, Massey did not say a word. After a half hour the conversation was speeding downhill. Astute enough to see my sink or swim predicament, I said [bluntly]: “Have I said anything so far that makes you think I am full of shit?”

That got his attention. “Yes, you said you wanted to be the best. You don’t want to be the best; you just want to win.” Massey, like any good coach, was offering the reminder that winners play harder than anyone else.

As fate would have it, I didn’t get hired at Salomon Brothers, but right after meeting Massey, the word ‘Turtle’ crossed my desk for the first time. Shortly thereafter, in 1996, long before YouTube.com, Google, and millions of blogs, I was there at the start of TurtleTrader — a controversial website designed to teach trend following and Turtle trading. It ended up becoming one of the most popular financial websites in the world and was ultimately the start of this book.

One of my goals has always been to make people think twice. That attitude has made me a target, but I was a baseball catcher so I am used to taking the shots. I often face intense reactions because I represent the other side that’s never considered. Ten years of digging and reporting have produced my fair share of critics, some legit, some off the wall. I am a messenger and people love to shoot messengers.

At the end of the day, this was not the career direction I’d originally planned as a freshly minted graduate. However, sitting at the nexus of access and insight from some of the best trading minds on the planet has become my singular passion — for now.

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.

Trading Numbers, Not Markets

Posted on by Michael Covel

An excerpt from my book The Complete TurtleTrader:

Richard Dennis’s friend Tom Willis had learned long ago from Dennis why price, the philosophical underpinning of Donchian’s rule, was the only true metric to trust. He said, “Everything known is reflected in the price. I could never hope to compete with Cargill [today the world’s second-largest private corporation, with $70 billion in revenues for 2005], who has soybean agents scouring the globe knowing everything there is to know about soybeans and funneling the information up to their trading headquarters.” Willis added [when talking about trend followers], “They don’t know anything about bonds. They don’t know anything about the currencies. I don’t either, but I’ve made a lot of money trading them. They’re just numbers. Corn is a little different than bonds, but not different enough that I’d have to trade them differently. Some of these guys I read about have a different system for each [market]. That’s absurd. We’re trading mob psychology. We’re not trading corn, soybeans, or S&P’s. We’re trading numbers.”

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.

Top Female Trend Follower: Leda Braga of BlueCrest

Posted on by Michael Covel

A fund manager (and client) writes me from Brazil:

Hi Michael. you ever heard about Leda Braga? She is a Brazilian trend follower with more than $1B USD in assets. She runs BlueCrest and Man has been allocating in her fund for a long time now. Interesting that she is a women, Brazilian, a trend follower and few people know her.

Very quiet firm…more:

Braga, whose $8 billion Blue­Trend Fund is a momentum-based, trend-­following fund, stands alone as the world’s top female portfolio manager in terms of assets under management. Although she prefers to fly under the radar, fellow hedge-fund mana­gers swoon over her knowledge of FX/interest-rate hybrids, equity derivatives and interest-rate exotics, offering praise composed of equal parts shock and awe. As one multibillion-dollar hedgie puts it: “I met her at a Tokyo conference, and if there were ever a quant strategy I would invest in, it’s hers. She’s constantly stressing the need to upgrade and refine trading systems, that you can’t just walk away and expect them to perform with markets shifting so quickly. She’s a dynamo.” Braga heads BlueTrend’s quant strategies. She’s also the president of BlueCrest Capital.

Braga, 42, attended Imperial College in the U.K., where she earned a Ph.D. in engineering and worked for three years after graduation as a lecturer and a research-project manager. She is reportedly the largest staff equity holder in parent company BlueCrest, after legendary cofounders Bill Reeves and Michael Platt. Chances are this might have something to do with the massive returns she has bagged since her fund’s inception in 2004, not to mention her flawless handling of the subprime crisis, which has flummoxed many of her competitors. “Last year, the BlueTrend fund returned approximately 28 percent, net of fees, and this year it was up about 13 percent on the same basis by the end of July,” notes BlueCrest CFO Andrew Dodd.

A former JPMorgan colleague of Reeves and Platt, who quit their jobs as proprietary traders in 2000 to found BlueCrest, ­Braga worked for nearly seven years as a vice president and quant analyst on the bank’s London derivatives-research team before joining the spin-off and derivatives risk-management firm Cygnifi Derivatives Services in 2000. BlueCrest snared her in October 2001, deciding its successful maiden voyage into fixed-income and currency markets should be encored with some black-box strategies. Braga’s fund launched in 2002. A year later, Man Group snapped up a minority stake in BlueCrest, and the rest is trading history.

Despite all the fanfare, Braga is strikingly modest. Attempting to reach her, Trader Monthly ­received an e-mail in which she beseeched her assistant to ward us off. “Aaaarghhh!” she lamen­ted. “Only the misinformed can possibly be interested in me.” Genius, it seems, doesn’t always take to the spotlight.

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.

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• 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.

Michael Covel Striker Report Interview with John Gallwas

Posted on by Michael Covel

John Gallwas recently interviewed me for his Striker Report:

Michael Covel
Author, Film director, Educator
Program(s) Developed: Michael Covel’s daily trend following, economic and political commentary
Interviewed by John F. Gallwas – Founder of Striker Securities
Michael Covel is a highly respected author, film director, and entrepreneur. He extends his trading expertise to readers and clients through the use of film, the worldwide web and the written word. He has published two books: “Trend Following: How Great Traders Make Millions in Up or Down Markets” and most recently “The Complete TurtleTrader: The Legend, the Lessons, the Results”

Fueled by the success of his two bestselling books, Covel enters filmmaking with his debut film, “Broke: The New American Dream” an insightful and witty documentary that explores the ripple effects of behavioral finance across the 2007-2009 market and economic crash through the diverse worlds of fish markets, sheep farms, lottery stores and poker tables.

Covel earned a Bachelor’s of Arts from George Mason University and a Master’s of Business Administration from Florida State University. He has also completed graduate level courses in international relations in London.

John Gallwas: In order to get everyone on the same page, let’s start with a simple definition of the two basic price forecasting theories known as “fundamental” and “technical” analysis.

Michael Covel: Fundamental analysis to me means assembling all of the data and knowledge about some market to hopefully make a prediction about its direction. Doing this will hopefully allow you to buy “cheap” or find “value”. Built into fundamental analysis is the assumption that you will know when to exit. Technical trend following says something quite opposite. It says we have no idea why any market goes up or down, there is too much information, so why not simply follow the trend up or down with a preset exit plan. Trend following could care less about crop reports or Fed conjecture, just follow the price trend.

John Gallwas: What are the “pros” and “cons” of each our readers should know, and which do you believe is the best for most traders to study.

Michael Covel: I think fundamental analysis is a waste of time. Is that too blunt? Bottom line, no one has any idea what stock, bond, currency, and commodity markets will do over the next six months. How many of the great fundamental analysts had calls that made their clients money over 2008? Not many as trillions of dollars were lost through buy and hold prediction nonsense. Sure, some very smart analysts will get the next six months of predictions right, but then again when you flip a coin you have a 50% chance of being right too. Does that mean there is no hope for profit? No. If you can put aside the need to try and predict the future and if you can instead trade as a technical trader, like trend followers who made fortunes in 2008, you will have a chance to make money going forward. If we can’t know the future and if we can’t know what direction any market will trend it is far better to have a plan to systematically profit by reacting to market moves versus a reliance on the false hope of predictions. Let me also use some quotes from top trading minds that I have interviewed. Consider the most successful Turtle Jerry Parker: “Technical Analysis relies upon the idea that smart money will move into a market and give advance warning that a position should be taken. This often occurs when the true major fundamentals are unknown.” Ed Seykota, from “The Market Wizards” adds: “While Fundamental Analysis may help you understand how things work, it does not tell you when or how much. Also, by the time a fundamental case presents, the move may already be over.”

John Gallwas: As a well known author, lecturer, and consultant, you work with many traders. What have you found to be the difference between the profitable and unprofitable trader?

Michael Covel: In my second book “The Complete TurtleTrader” I go into the differences between the world famous Turtle traders who won big and lost big (Chapters 11, 12, and 13). That’s right, contrary to myth, not all Turtles were big winners. Some Turtles like Jerry Parker have won massive profits over the years and some Turtles, like [name; see book], have not made it as successful traders and have literally imploded. Why is that? It comes down to emotional intelligence. Some Turtles could harness their emotions in order to stick with their trading systems, some could not. The ones, who did not, the ones who thought they were smarter than the system, went bust. I guess I could be less black and white about it, but why do that.

John Gallwas: There are many “trading systems” that have been developed by third-party vendors, brokerage firms, and by individuals. What advise can you give our readers on how to choose and operate a trading system?

Michael Covel: Understand what is under the hood and why — or don’t trade it. Real simple. Next step? Risk and reward are interrelated. How much risk are you willing to take to get the desired reward? It can be different for every person. A good trading system should allow you to turn up the “heat” (or down) to your desired risk tolerance.

John Gallwas: What is the story behind the documentary you produced titled “Broke: the New American Dream”?

Michael Covel: I have been fortunate to learn about markets and money from some of the best traders around the world. I wanted to share their wisdom with others and a documentary film seemed like a great way to reach people. Plus I am very passionate that the government has no answer to the current economic mess and no one is speaking that truth as bluntly as it needed to be said! The film is for everyone. Whether twenty-something?s or sixty-something?s, feedback so far has been one of “I did not expect that.” “Wow, is that how it really is.” “I need to change what I am doing!” Is there a central theme running through? Trust, but verify. If most people actually did that they might find out that they are on a really “wrong” path. Meaning, whether trusting the government, trusting social security will be there, trusting media images, trusting buy and hold…people just blindly trusted without even thinking. I always want to show people how “it” really works. Dissecting the wrong messaging of government, media and Wall Street is fun. To me, the film is a universal and timeless message.

More.

This interview is for informational purposes only and is not intended to be a solicitation of any kind. Trade only with risk capital. The risk of trading can be substantial and each investor and/or trader must consider whether trading systems are a suitable investment.

You may also be interested in the following Interviews and Articles: Jerry Parker Interview; the Trend Trading Strategy; Thoughts on Trading Software; Singapore Trading; and Continuous Improvement 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
• 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.