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Ep. 606: Jeff Bezos Is a Trend Follower with Michael Covel on Trend Following Radio

Jeff Bezos Trend Follower
Jeff Bezos Trend Follower

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Please enjoy my monologue Jeff Bezos Is a Trend Follower on Trend Following Radio. This episode may also include great outside guests from my archive.

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Ep. 577: Art Collins Interview with Michael Covel on Trend Following Radio

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My guest today is Art Collins, the author of “Beating the Financial Futures Market: Combining Small Biases Into Powerful Money Making Strategies”, “When Supertraders Meet Kryptonite”, “Market Rap: The Odyssey of a Still-Struggling Commodity Trader” and “Market Beaters.” He has been trading systematically for the past 30 years. Throughout the years Art wasn’t only focused on trading markets. He also studied how to beat the blackjack table and how to skew the odds in his favor when betting on sports.

The topic is trading.

In this episode of Trend Following Radio we discuss:

  • Systems trading
  • Richard Dennis
  • Card Counting
  • Mechanical systems
  • Robustness
  • Data mining

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TurtleTraders 30 Years Later

A nice audio interview about the Turtles: LISTEN.

Also read the great story:

The Complete TurtleTrader
The Complete TurtleTrader

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 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.

Overpopulation: A Trend Following Debate

When asked about trend following becoming “overpopulated” a Richard Dennis quote is often best:

“I don’t think trading strategies are as vulnerable to not working if people know about them, as most traders believe. If what you are doing is right, it will work even if people have a general idea about it. I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.”

Psychology and following the rules are paramount–bottom line. Consider more from an excerpt from The Complete Turtle Trader:

The techniques that Dennis and Eckhardt taught the Turtles were different from Dennis’s seasonal spread techniques from his early floor days. The Turtles were trained to be trend-following traders. In a nutshell, that meant that they needed a “trend” to make money. Trend followers always wait for a market to move; then they follow it. Capturing the majority of a trend, up or down, for profit is the goal.

The Turtles were trained this way because by 1983, Dennis knew the things that worked best were “rules”: “The majority of the other things that didn’t work were judgments. It seemed that the better part of the whole thing was rules. You can’t wake up in the morning and say, ‘I want to have an intuition about a market.’ You’re going to have way too many judgments.”

While Dennis knew exactly where the sweet spot was for making big money, he often fumbled his own trading with too many discretionary judgments. Looking back, he blamed his pit experience, saying, “People trading in the pit are very bad systems traders generally. They learn different things. They react to the [price] ‘tick’ in your face.”

Feedback from a listener that addresses Richard Dennis:

Hi Michael,

Hope you are doing well. Again, I appreciate everything, specially your commitment to the trend following podcast. In a recent back to back [other podcast] between [name] and [name] they address an important question:

Q: What lessons do you take from the fall of Richard Dennis? One of the biggest swingers at the Board of Trade…great trader…not only that but he believed he could replicate trading skills and did so successfully. He trained a whole generation of people who came up [and] manged billions…and then he basically goes and explodes. What is the practical lesson for your audience here?

A: Speaking to the trend following school in particular (and various trend followers who blew up or bled out): I do believe that certain trading styles and methodologies can suffer greatly from overpopularity. When there are too many people following a widespread strategy, and not enough differentiation among that active group, the strategy can be degraded to the point of no longer working.

Personally, I don´t agree with that argument because market trends have been persistent over time. As Howard Marks said: “We don´t have to worry about everybody becoming to prudent or to wise, because we are talking about human nature.”

I would appreciate your insight on this argument.

Peace,
[Name]

I don’t see any argument. My views on this are answered across 2 books comprehensively (the question above has some inaccuracies for starters):

1: The Complete TurtleTrader
2: Trend Following

My best response is in about 180,000 combined words (that is not a dodge; reality is that my answer is long). And yes I talk about the good and bad of Richard Dennis, but the good far outweighed the bad.


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.

Trend Following Feedback

Feedback in:

Dear Michael,

First off, I would like to thank you on the excellent work you have done. You should be very proud of your efforts. The courage you have shown at times is highly impressive.

I am not a particularly good writer, but I will try to keep this concise and accurate. I have been working in the finance area for roughly ten years, but until recently I didn’t know of you. In fact, I only discovered Richard Dennis and the turtle story a few years ago. I read up on them for a bit, then as daily work took over and whatever else, I never went back to them. I then lost my job, became pretty sick, moved country…well, a lot happened. I have always been surrounded by fundamental type fund managers and analysts, who never really wanted or asked my opinion, I was just their operations or trader guy. I never had the confidence to voice my opinion. Listening to conversations with lines like ‘China mobile is cheap at twelve times earnings’ or ‘I should really tweak my estimates slightly on mediatek’. The usual blah blah, by guys who only cared about beating their peers, despite meaning that could mean their clients losing money. While I never believed it, I never really took the time to seek an alternative way. I was generally more interested in sport. Also, I never had any kind of mentor. I know these sound like lame excuses, maybe they are.

To use your words Michael, I am ‘making a commitment to change’. My motivation is one for change in my life. I have consumed a lot of your work in recent months, mostly the books and podcasts (an outstanding service). I am very interested in purchasing your training program. I am more than humble to admit, I can’t turn things around without help and sound advice. I am not seeking a Holy Grail as mentioned on your site. I want to give myself minimum one year full effort and commitment, part of a plan to turn things around. Of course, it will hopefully be one year or many more.

About the program, I am concerned that I may wander off course, so to speak. There is a lot of reading material. Can I read that over time? Can I educate myself with the systems at the same time? I worry that without checkpoints along the way, the books will gather dust. I guess that is up to me. My capital for investments at the moment is relatively modest. I also worry that I should have more questions to ask, but don’t.

Thank you for your time. I am happy to call you if you have a spare five mins, I understand you are a busy guy. Email is more than fine.

Regards,
[Name]

Sure, we can talk. I look forward to the chat.

In advance of that call listen.


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.

“Why has the turtle trend-following system stop working?”

A recent chat thread about “Why has the turtle trend-following system stop working?” [not accurate headline]:

Forum guest: The drawdowns are horrendous for long term trend following systems. Don’t go near them!

Covel: Chris Clarke has good insight on this podcast ep. for those that scream “drawdown” when discussing trend following.

Also, drawdown goes far beyond trend following. Consider an excerpt from PragCap:

Another way to illustrate this is if you look at something like Berkshire Hathaway. BRK has gone down 50% three times in the past (or maybe more). Once in the early 1970′s, once in 1999 and then again during the recent crisis. Of all the investors who owned BRK in 1970, how many have done better than the 20% or so return of the stock over the years by getting in and out of it in order to avoid the 50% drawdowns?

Big returns over time come with big drawdowns. Buffett has also said himself:

“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

No wisdom there (heavy sarcasm).


My thoughts on Michael J clark of Clark Capital Management, one of the Trend Following Legends.


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. 361: Francisco Vaca Interview with Michael Covel on Trend Following Radio

Francisco Vaca
Francisco Vaca

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My guest today is Francisco Vaca. Vaca can be called a second generation turtle trader. He worked with Richard Dennis at C & D Commodities, and for the last 15 years has been closely associated with Paul Rabar. He is now the Co-Chief Investment Officer at Rabar Market Research. Before he became a trader, Vaca was a particle physicist and worked at the famous Fermi lab. This is not an insignificant fact, as his background in mathematics and statistics became very useful in his career as a trader.

The topic is Trend Following.

In this episode of Trend Following Radio we discuss:

  • The importance of distinguishing between long term and short term track records
  • “Alpha” and “beta” trading strategies
  • How the holding period length affects the risk-reward profile and return streaks
  • The benefits of diversification across different holding times
  • Using high frequency trading technology in long term trend following
  • How correlations are often misinterpreted
  • Knowing the limitations of your tools

“The best performing system historically is not necessarily the best system going forward” – Francisco Vaca

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