Please enjoy my monologue The Six Inches Between Your Ears with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive.
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The guy who wins the most hands is not the guy who makes the most money in the long run. The guy who never loses a hand is not the guy who makes the most money in the long run.
Think about it. Or don’t.
Note: Shout to Tony Hsieh for the words. My film takes the thought further.
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Jim Rohrbach writes:
I was listening to the Gary Kaltbaum show last night, and my friend Brian Balsanek was filling in for Gary. Brian said something that was very profound and simple. He said, “The stock market is always right.” I love that. Yes the market is always right. Often we hear people saying that the market is going to go up or go down. They place their investment decisions with what they think the market is going to do. Then when the market doesn’t do what they think it should do, they try to tell us that the market is wrong. They don’t admit that they are wrong. The market does what it wants to do and it is always right. We may not agree with what the market is doing at any point in time, but it is futile to say the market is wrong or to invest opposite the market. If the trend of the market is up, that is the correct trend and we need to go with it. If the trend is turns down, we should get out and not try to rationalize that the market should not be going down. Since the market is going down, and since the market is always right, we should get out.
Nice Jim.
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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.
An unexpected source explains why many miss understanding trend following trading:
If the explanations you’re demanding for what works aren’t working, perhaps it’s because you’re avoiding nuance in exchange for simplicity.
[For example], your boss keeps asking you to explain your whole plan in three Powerpoint slides. The VC who allocates one minute to understand why your business will work has done everyone no favors. The blog reader who clicks away after a paragraph wasted his time visiting at all.
Skip the complicated, time-consuming part at your own risk…If it were obvious, everyone would do it. Wait, that’s too simple. How about this: Nuance and subtlety aren’t the exception in changing human behavior. They’re the norm.
A great example of how some miss understanding trend following by avoiding the subtle? They see one losing month and panic. If you work with that type of quick judgement you would be better off taking the blue pill and going back to sleep. Seriously! That excerpt connected well with this article sent by a reader in Australia that pumps the mistaken notion that investors can predict trends:
He’s adapted Nate Silver’s model very unscientifically to the global news cycle, using it to compile a handpicked store of knowledge, which he then aggregates to get a feel for where markets are heading.
The system requires at least five or six different news sources ranging across left to right leanings to provide the sort of radar that will give an accurate fix.
You may think you don’t have time to manage this, but there are apps that make it easy. Pulse is one I use because it enables the collection and collation, in chronological and subject order, of top news of the day from nominated sources. My friend’s favourites include Salon, Slate, The Atlantic, Bloomberg, CNN and Huffington Post.
He spends part of every morning trawling through headlines and reading only what he deems relevant to provide a snapshot of where the world is at any given moment. Over time this has helped him develop an accurate read on how he might reposition himself across sectors.
“If you’re reading a variety of news sources, you definitely start seeing trends, especially as everyone’s saying the same thing just in different ways,” he says. Lots of cautionary stories generally mean something bad is about to happen.
“If you’re hearing the same thing from multiple sources, that’s generally when something’s going to happen,” he says. “Which is why I’m out of stocks. There’s no way they’re going to stay where they are. They have to come down.”
Isn’t this akin to timing the market?
“No. I’m just trying to predict a medium- to long-term trend. If you want to get rich quick, this isn’t the way to do it because it’s very macro.”
He admits his method is not totally straightforward, and that there may be quite a wide margin for error depending on nominated reading material and how clever the reader is it at distilling it. But do it for long enough and you will get better at it.
Read, absorb, think and learn. Then do it again, then again. And eventually you’ll be smarter, too.
If you think tracking news sources to predict market trends might possibly make you rich, then you will probably get exactly what you want from the process. What is that? To have the feeling of losing money! For those of you who want the subtle from me, the nitty gritty, read.
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.
From a listener in Europe:
Will continue to follow your site…I enjoyed the last audio regarding “do what you wish to do”, “microphone guy”, etc. and sent it to my daughters.
Kind Regards,
Ray G.
Thanks Ray. Hope your daughters enjoy it too!
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.
From Gaping Void:
Statisticians and politicians would like us to believe that our lives: What we consume, believe an think, can be seamlessly plotted into some sort of model. Maybe that is true for an an average of an entire population, but it completely ignores the micro. What is true for the entire population sn’t true for the individual. We are all a combination of different needs, beliefs, desires. It’s our individuality that makes us human.
Trend following is not about a bell curve either.
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.
Michael Mauboussin appeared in my film Broke a few years back and I have always enjoyed his efforts. While not a trend follower much of his work dovetails nicely with the heart and soul of trend following success: human behavior and inefficient markets. Two recent Mauboussin works worth reading (PDF):
The Importance of Expectations. The Question that Bears Repeating: What’s Priced in?
Shaking the Foundation: Revisiting Basic Assumptions about Risk, Reward, and Optimal Portfolios
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.
