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Ep. 362: Speculation Wins Today with Michael Covel on Trend Following Radio

Speculation Wins Today with Michael Covel on Trend Following Radio
Speculation Wins Today with Michael Covel on Trend Following Radio

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Speculation has become a pejorative for some in recent times. A quick search yields the following definition of speculation: “forming a theory about a subject without firm evidence.” Yet if we look at the origin of the word, “speculor” means “to observe” in Latin. To speculate is to observe, and to make decisions based on those observations.

In business and in life, there are ultimately two choices: to speculate or to gamble. The difference between the two is simple: the first has a strategy behind it; the second does not. The first relies on predetermined parameters for making decisions; while the second leaves decisions up to circumstance or emotion.

In this monologue, Michael Covel talks about the philosophical foundation of success: speculation. This episode features many notable quotes from famous economists and traders, going back as far as the 1800s. The wisdom of these men is the foundation of trend following, and is as relevant today as ever.

In this episode of Trend Following Radio:

  • Why speculation is such an important concept
  • The philosophy behind trend following
  • Watching results rather than causes
  • Cutting short your losses
  • Timeless excerpts from as early as the 1800s
  • The early beginnings of Wall Street

“Cut short your losses, let your profits run on.” – David Ricardo

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Ep. 360: Pas de Dough with Michael Covel on Trend Following Radio

Pas de Dough with Michael Covel on Trend Following Radio
Pas de Dough with Michael Covel on Trend Following Radio

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A May 25, 1959 Time Magazine article called “Pas de Dough” was recently forwarded to Michael Covel. It was about a professional dancer named Nicolas Darvas, who had made two million dollars trading stocks. This was probably one of the first trend following articles to appear in a major publication.

Sports metaphors when it comes to trend following work great, but there are clearly others. For example, both trend following and dancing judge the public’s enthusiasm and use that as the indicator for the next move.

In this monologue, Covel talks about the article and Darvas’ book, breaks down the fundamentals of trend following, and explains why the philosophy behind trend following still applies today. He also comments on how trend following can be applied to the current black swan economic situations in China and Greece.

In this episode of Trend Following Radio:

  • What trend following and dancing have in common
  • The philosophical foundations of trend following
  • Stock trading and location independence
  • Why relying on “fundamentals” is fool’s gold
  • What being a silent partner in the trend means
  • Why Darvas’ thinking from 1959 still applies today
  • The importance of having no ego when it comes to trading

“The only sound reason for my buying a stock is that it is rising in price. If that is happening, no other reason is required. If that is not happening, no other reason is worth considering” —Nicolas Darvas

Mentions & Resources:

Listen to this episode:

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Get the foundation to making money in up, down and *surprise markets on the Trend Following mailing list.

Have a question or comment about this episode? Post it below.

Trend Following 101: “When You Are Caught in A Strong current, It Is Fatal to Resist”

Consider:

If, when swimming, you are caught in a strong current, it is fatal to resist. You must swim with it and gradually edge to the side. One who falls from a height with stiff limbs will break them, but if he relaxes like a cat he will fall safely. A building without “give” in its structure will easily collapse in storm or earthquake, and a car without the cushioning of tires and springs will soon come apart on the road. The mind has just the same powers, for it has give and can absorb shocks like water or a cushion. But this giving way to an opposing force is not at all the same thing as running away. A body of water does not run away when you push it; it simply gives at the point of the push and encloses your hand. A shock absorber does not fall down like a bowling-pin when struck; it gives, and yet stays in the same place.

Trend following philosophy 101.

Source: Alan Watts.

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