“You’ve surrounded yourself with one of the most advanced group of mentors possible…The people on your podcasts, and people in your life, all are people with strong opinions, all people that make you think and make you grow. You just have some kind of an affinity for people like that, and that’s part of what makes you good at what you do.” Ed Seykota, Market Wizard
Michael Covel is the voice behind Trend Following™ Radio. His podcast is the underground alternative hit that has ranked as high as #2 on iTunes investing channel (with 7M+ listens and counting).
Q: Michael, how did this podcast happen? A: During the production of my filminterview skills developed. And after my 4th book I decided on a whim to launch a trading podcast. It has gone far beyond trading to network TV-level-guest diversity. Nobel prize winners on my show? Never expected that, but I embrace it. Check out nice words from the Wall Street Journal:
“Michael Covel’s podcast has had over  million listeners and he’s completed [600+] episodes. He’s probably the most established podcaster on this list—and it shows. Mr. Covel’s podcast is great for those looking for alternative views on the market, those who are tired of hearing the same old stories told on CBNC and other traditional outlets. This is highly recommended if you are looking to expand your mind in investing. Mr. Covel has had some incredible guests, to include multiple Nobel Prize winners and world-famous investors. One of my favorite episodes was when Mr. Covel interviewed Annie Duke, a former professional poker player who has some incredible insights on decision making. Mr. Covel always has me thinking and Annie Duke only amplified my brain-wave activity.”
Having the right fundamental information will never guarantee success. Ray Dalio, one of the biggest traders on Wall Street says he trades off of fully automated fundamentals. If this is true what fundamentals does he choose to automate? In the same head space a reader forwarded Michael a tweet recently. It was a tweet from an executive associated with a big USA trading firm. This executive was asked by a business student, “What does a typical week look like for you?” His list went like this [Michael digs in]… How much time is being wasted?
If consuming that information isn’t needed then what do you use to trade? One piece of information – price. You take the price and look at the trend. Things in motion tend to stay in motion. Forming rules that you can stick to when the big trends come is key to anyone’s trading success.
Laura Doyle is bestselling author of “The Surrendered Wife”, and her newest work is “The Empowered Wife.” Relationships are a skill just like everything else in life. They can be hard and sometimes having some basic survival tools could make the difference between having a failed relationship or a thriving relationship. Laura gives a perspective and tools that we can all use in our modern day relationships.
Laura went through thousands of hours and thousands of dollars of marriage counseling that did not work before she tried asking her friends what they were doing right in their relationships. She wanted to learn what was working for them and what hadn’t worked for them over the years. Her main “aha” moment was when she realized the problems her and her husband were having were self inflicted.
Who has the most power in a relationship? How do you make your spouse feel respected? What are some main differences emotionally between men and women? What type of language do men respond best to? What type of language do women respond best to? Laura answers these questions and more on today’s podcast.
Trend following is as much about observing and understanding human behavior as it is about moving averages, breakouts, and position sizing. Understanding human behavior and how it relates with markets is commonly referred to as behavioral economics or behavioral finance. It evolved from the contradiction between classical economic theory (EMT) and reality. The assumption people act rationally, have identical values and access to information, and use rational decision making is one preposterous assumption.
However, trend following strategies only work if price trends continue. But why should trends continue? If prices initially under-react to either good or bad news, trends tend to continue as prices slowly move to fully reflect changes in fundamental value. These trends have the potential to continue even further as investors herd (or chase trends). Herding can cause prices to overreact and move beyond fundamental value after the initial under-reaction. Naturally, all trends must eventually end, as deviation from fair value cannot continue infinitely. Said another way, people are irrational as hell and seldom make rational decisions even if they think they do. That’s not my one-man opinion either. I have had the good fortune to learn from and interview the top minds in the field of behavioral economics and finance, including Nobel Prize winners Daniel Kahneman and Vernon Smith, Dan Ariely, Colin Camerer, Christopher Chabris, Robert Cialdini, K. Anders Ericsson, Gerd Gigerenzer, Donald MacKenzie, Spyros Makridakis, Terrance Odean, Steven Pinker, Laurie Santos, Hersh Shefrin, Daniel Simons, Paul Slovic, Didier Sornette, Meir Statman, Brett Steenbarger, and Philip Tetlock to name a few of the best minds in the field. (You can find these interviews on my podcast at www.trendfollowing.com/behavior.)
Some want to argue about everything but this. Big mistake.
Anthony Tjan is author of “Good People: The Only Leadership Decision That Really Matters.” He is CEO and managing partner of Cue Ball and has a successful track record as an entrepreneur, principal investor and strategic advisor. He leads his firms overall direction and is involved in activities across the board with Cue Ball.
What was the progression in Anthony’s life that brought him to where he is now? Anthony is an immigrant and experienced a great amount of generosity throughout the years aimed at him and his family. He shares a story of being 15, selling picture frames in Canada. At the end of a long hot day of lugging around picture frames an elderly women invited him in for some tea. She finished their conversation saying, “As you go forward just make sure, as much as you love the product you are selling, you love the people more.” She ended telling him, “Just so you know, I believe in you.” This woman and that conversation resonated with him and set the stage for his leadership philosophy.
Anthony moves on to discuss the building blocks of a great company. Most have trouble looking at life or a business as a marathon. Biases give us a sprint based mentality and more often than not it can be detrimental. When choosing a hire, hire someone with character over competency. Skills can quickly be taught, character cannot. Of course, there needs to be a level of competency but a person needs compassion, empathy, and overall great character. Competition and compassion can be enforced together and we don’t need to lose one to gain the other.
Shedding drama from your life and company is also mission critical and goes back to hiring based on character. Drama is a disease. When hiring someone, always ask yourself, “Is this person going to act or react?” After every interview Anthony says to ask yourself a few things: 1. Would you want to hangout with this person outside of work? 2. Do you respect the persons work? 3. Would this be a person you would be proud of? 4. Throw out reference checks. Ask them to give two or three examples of lower level people who they have influenced.
If you are in the being hired phase of your life rather than the hiring phase, you may be asking, “How do I get started?” Anthony’s #1 piece of advice is to find a good mentor to model after. Mentorship is a tricky thing though, so how should young people today navigate gaining a mentorship? All mentorships begin with a baseline of chemistry. If that isn’t there, it can turn into a negative experience rather than positive. Great mentorship is also about breaking down titles and speaking to each other on a human to human level. Also, the best mentors don’t just try and help you in the confines of your work. Mentors should not only be helping you out in business but also helping to find your calling or higher purpose.
In this episode of Trend Following Radio:
Competency is not enough
Winner take all mentality
Value centric organizations
Pessimism vs. optimism
“Choose goodness as a lifelong intention.” – Anthony Tjan
Denise Shull is a performance and decision coach to traders and athletes. She is well known for her effectiveness in assessing performance under high pressure situations. Denise began her Wall Street career in 1994 as trader and desk manager on the Chicago Board Options Exchange. She was always fascinated by the psychology side of trading from the outset of her trading career. In 2015 she offered critical insight on how to put together one of the main characters of the hit show “Billions” on Showtime.
Denise has counseled an extremely wide variety of traders with all kinds of personalities and trading styles. However, at the end of the day everyone is human and all traders have common psychological threads which she points out. When Denise analyzes a client she tries to understand a sequence of feelings that person is making and what the patterns of their feelings are. At first it is just about her figuring out how a clients brain works, and then she helps them see the patterns.
What was the trigger for Denise to go down the path of studying the mind and human behavior? Starting from a young age she enjoyed observing and counseling friends. In her mid to late 20’s she started looking at her friends relationships and seeing that the people were all different but the scenarios were the same. A teacher helped point out a theory of Freud’s. Freud believed there is a critical period for attachment and self image when you are a child. Denise gives examples of how human reactions stem from a template made in the first 2-3 years of life.
Michael and Denise finish up talking fractals, psycho analytics, efficient market theory and compare notes on Nobel Prize winner Harry Markowitz.
Michael has had some of the brightest psych minds on his podcast. Today he pulls together the great psych minds in trading into one podcast. Those interviews include: Brett Steenbarger, Jason Williams, Van Tharp, Daniel Crosby, and Meir Statman.
Brett Steenbarger is a Clinical Associate Professor of Psychiatry at New York State University, and author of The Daily Trading Coach, The Psychology of Trading, and Enhancing Trader Performance. His newest work is Trading Psychology 2.0: From Best Practices to Best Processes.
Jason Williams is author of The Mental Edge in Trading. Jason received his psychiatry degree at John Hopkins. His father is famed trader Larry Williams.
Van Tharp runs the Van Tharp Institute and is author of four acclaimed books published by McGraw Hill: Super Trader, Trade Your Way to Financial Freedom, Safe Strategies for Financial Freedom, and Financial Freedom Through Electronic Day Trading. His new book is called Trading Beyond the Matrix. He was also featured in Jack Schwager’s Market Wizard’s: Interviews with Great Traders. Van Tharp received his Ph.D. in psychology.
Daniel Crosby is author of The Laws of Wealth: Psychology and the Secret to Investing Success, and co-author of the New York Times bestseller Personal Benchmark: Integrating Behavioral Finance and Investment Management. His background is in behavioral psychology and he sees the markets as a great backdrop to view human behavior in a real world setting. He is also founder of Nocturne Capital.
Meir Statman is a professor of finance at Santa Clara University and a behavioral finance expert. His acclaimed book is titled What Investors Really Want.