Subscribe now and watch my free trend following VIDEO.

Tag: Trend Following

Trend Following Podcast Feedback

Posted on by Michael Covel

Feedback in:

Michael,

This email may be a bit long, but I wanted to express my appreciation for your podcast, your way of viewing the world and for exposing me to many of the critical thinkers I wish I had learned of a long time ago.

Thank you for introducing me to trend following.

I love rules. I’ve always known this, but I also haven’t always understood just how rules can help you achieve anything and everything. I always understood finance and investing to be a complete gamble. You can’t trust fundamentals, you can’t control the weather, you can’t predict crisis, but you can understand price, and you can respond to shifts in price. Price gets you paid. Trend following, and your book The Complete TurtleTrader showed me that rules won’t make you win every single time, but when you follow good rules, you lose a whole lot less than when you role the dice.

A few heuristics I’ve placed on my wall, one is a paraphrase of Richard Dennis: “Following rules is always better than making judgements.” Another by Winston Churchill: “Facts are better than dreams.”

I am a chiropractor in private practice and I practice two techniques, both of which I am very successful at. I have had patients travel from afar who have seen other practitioners who use the same, or similar techniques as myself, and I am able to get results when the other doctors don’t. Some of those other doctors are fairly prominent in the profession, and are even instructors.

It’s a little disconcerting, when someone comes to you for help after they haven’t been helped by someone you look up to.

“Geez, if he can’t help you, what do you think I’m gonna be able to do?”

When I talk with my colleagues I realize they aren’t practicing the technique the way it was taught, they’re making judgements. I follow the rules, and I see success where others don’t. I’m nothing special… I just trust the process. You’ve helped me to understand my focus should always be on process and the outcome will take care of itself.

I’m ashamed to tell you that I haven’t yet personally implemented a fiscal investment strategy (don’t yell at me). I’m trying to save up enough to invest with a systems-styled firm. They typically require a significant amount to start an account, and I just haven’t yet had the guts yet to try it on my own without any hand-holding in the process. I also have a wife and 6 young children, so most of my money gets invested in my family and my practice.

Thank you for introducing me to Nassim Taleb. I love his acerbic assurance that you can’t predict. Period. All you can do is have rules in place to respond to what happens. I so appreciate an Anti-Fragile philosophy and how Taleb has applied it to nearly all aspects of his life, including fitness. I would have never heard of Taleb if it hadn’t been for your podcast.

Thank you for introducing me to Daniel Kahneman, Ryan Holiday, stoic philosophy… I could go on and on.

You’ve become kind of like a business/philosophy coach to me. I think I enjoy your monologues, if not more, at least as well as I enjoy your interviews.

I don’t agree with every viewpoint you hold, (I am a confessional Christian) but that’s OK, I’ve always been real good at not throwing the baby out with the bath water.

Again, my sincerest appreciation for your body of content.

Please keep it up.

Yours,
[Name]

Thanks for the great feedback!

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.

My Journey to Self Discovery through Trend Following

Posted on by Michael Covel

It has been a long journey discovering trend following. Consider an excerpt from the preface of Trend Following:

Trend Following challenges much of the conventional wisdom about successful trading and traders. To avoid the influences of conventional wisdom, I was determined to avoid being influenced by institutionalized knowledge defined by Wall Street and was adamant about fighting “flat earth” thinking. During my research, starting with an assumption and then finding data to support it was avoided. Instead, questions were asked and then, objectively, doggedly, and slowly, answers were revealed.

If there was one factor that motivated me to work in this manner, it was simple curiosity. The more I uncovered about trend followers, the more I wanted to know. For example, one of the earliest questions (without an answer already) was learning who profited when Barings Bank collapsed. My research unearthed a connection between Barings Bank and trend follower John W. Henry (now the majority owner of the Boston Red Sox). Henry’s track record generated new questions, such as, “How did he discover trend following in the first place?” and “Has his approach changed in any significant way in the past 30 years?” Read more on John Henry Products.

Now for feedback in the same vein…

Hi Michael,

I am a trend following trader and entrepreneur based in Miami and Toronto. I have to tell you that you have become a mentor to me even though we haven’t met. You have helped give me the tools, conviction and confidence to believe in trend following and put it into practice. Admittedly it took me a long time to fight through the noise, particularly because I spent 10 years on an institutional equity desk in NY and Toronto. Ironically a traditional commission based institutional broker/investment bank is the absolute worst place to gain confidence as a trend following trader. The brokerage house is all about “the story” and predicting the future never even touching risk management, position sizing or exit strategies.

I first bought your TurtleTrader course around 2000 after devouring the website and wanting more, but I was 26 and on my way up the corporate ladder at Merrill Lynch. My ego always got in the way and I didn’t have enough quiet time to think and read and gain the confidence that is so critical. I also was still searching for the “holy grail” not knowing I’d already found it.

Years later I picked up my study of trend following again after rereading Reminiscences of a Stock Operator. I then read your books and then ordered your current course. I now turn to the podcasts when I want ideas refreshed or motivation and I look forward to hearing your interviews.

This message could not have asked for a better messenger Michael. You kick ass with your podcasts. You are honest and direct and even funny at times. I’ve even got my girlfriend to listen to a few. The episode with Vernon Smith was particularly powerful. Putting this out there for free is mind blowing and I’m very grateful to you for putting out such an incredible body of work. You are affecting people’s lives and I thank you for affecting mine.

Okay, enough smoke up your ass. Tim Ferriss should be on your podcast and/or you should be on his. In his most recent episode (63), he talks about his investing style toward the end and why he is scared to invest in public markets. He can’t deal with the ups and downs of staring at rising and falling equity so he only invests in startups. What struck me is that he is basically following a trend following risk model in his angel investing. He accepts that less than 50% will be winners and diversifies with the assumption that the winners will more than pay for the losers. Considering Tim’s expertise is in breaking down and mastering skills that have scientific and mathematical track records it seems to me that he would be interested in your work. I find it hard to imagine why anyone who wants to make money in the markets wouldn’t be interested in your work. Anyway, worth exploring even just as a reference in your own podcast.

My question is on constructing a model and automating a fairly basic trading system: is there a data feed you recommend and/or software that can generate signals with a data feed? Do you recommend any particular broker that is very reliable and execution based with competitive fees and an online platform?

Thank you very much
[Name]

After initial interchanges a few months later I heard from the listener again:

Your podcasts continue to be a wealth of education, entertainment and enlightenment and I can’t thank you enough. I don’t think people really appreciate the value you are providing. I have spent approx [number] (courses and books) on your products and I feel like there is more than that value in the podcasts alone and I get those for free. If you’re ever in Toronto or Miami (we split our time) let me know so I can buy you a drink

All the best
[Name]

Thanks!

Related Articles and Podcasts

On Trend Following Trading

Heard it a thousand times

Interview Alison Gopnik

Three times out of ten

Let Your Curiosity Lead the Way

Inspirational Podcasts

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.

Jumping from Value Investing to Trend Following, How?

Posted on by Michael Covel

Feedback in:

Hi Michael,

I enjoy the podcasts. I certainly appreciate any tips for someone new in the trend following arena. Coming from a Ben Graham type investing style it is a bit different for me.

Thanks!
[Name]

Sure, start here. And here.

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.

AHL on Trend Following

Posted on by Michael Covel

Famed trend follower AHL:

The turn of the year is when traditional long only money managers state their predictions for the year ahead. Equity managers may be bullish if stocks are cheap or central bankers are expected to flood the markets with money, for example. Or they may be bearish if value is perceived the other way. It may not be an easy task, but the manager can generally make a guess based on a reasonably sound and intuitive argument. For a trend follower, however, it really is hard to answer the question in a manner that would satisfy most people.

The reason for this originates in how trend followers trade. The schematic below illustrates how trend followers are typically long when a market is rising and typically short when a market is falling. This is achieved through a systematic, non-discretionary process where computer algorithms analyse historic data in order to identify trends lasting anything from a few days to multiple months, with an average of around two months. Of course, individual markets may not trend all the time, so trend followers diversify by trading a wide variety of markets over many asset classes. The intention is that, as long as these markets are lowly correlated, the trend-following net is cast as wide as possible, and trends are captured wherever and whenever they occur. The technique is applied to the most liquid instruments available, meaning the strategy itself is highly liquid.

Bingo!

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.

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.

David Harding on Trend Following and Spreadsheets

Posted on by Michael Covel

Famed trend follower David Harding:

Taking a distant perspective, the trend following systems, which we developed in the 1980s, have just continued working. They didn’t work smoothly, but they continued to make money, so some level of success—providing you were not over-leveraged and you stuck to it—some level of success was eventually guaranteed, wasn’t it? Because if you keep making money, in the end the world’s going to find you. It’s not very quick, because it’s not very smooth, it’s not this high short ratio thing; its virtue is in trends forming in very high capacity. That’s its great virtue, because if you put a lot of money in it, it’s a very profound thing. It’s much more profound than many hedge fund strategies because it’s talking about the very exploitable effect in the price movements of whole asset classes. People talk about anomalies; it’s not like some small anomaly. It’s about the whole way the whole world works. It’s a theory about the way the world works, which is different from the theory that everybody in the financial world has about how the world works.

I did, I became very open. Of course Winton was relatively unsuccessful in the early 2000s. I actually went in when it was relatively unsuccessful. It became quite successful as a company, but several of our competitors, like Aspect, became much, much bigger and more successful because they had much more successful institutional sales, so I decided I might as well be hung as a sheep for a sheep is a lamb. And I started showing all the results that I hadn’t shown in 1993, so I started showing “this how it works.” Excuse me, but fuck it, this is my work. If I can’t make money, I’ll just show you it.

Yes, just following trends really. The trends changed slowly. The trends in the market, the slide in 2008, didn’t come out of the blue. It was a true bear market, a classic bear market, the kind of bear market that creates the need for the term bear market.

Had you computerized by that time, were you off the spreadsheets by this point?

A spreadsheet is a computer. This spreadsheet was just living somewhere inside a whole set of other computer programs. There’s probably a spreadsheet in NASA somewhere, one that was written in 1959 that’s still living in there somewhere. It’s just become part of a bigger thing.

It’s what Warren Buffett calls handicapping. That’s what he calls what he does, handicapping, which means setting the odds, so that’s what an investor has to do, they have to work out what the odds are.

The other thing, the book, it’s very important to realize that this is not a physical science, it’s social science, albeit it’s a bit of a wolf in sheep’s clothing, because it’s a social science which uses very rigorous and detailed mathematics. The thing about physical science is reality is what it is and it doesn’t change when you investigate it, whereas there are rules and laws that you’re seeking to tease out, whereas there aren’t any rules or laws in financial markets. There are no immutable eternal truths at all. That’s certainly nothing original I’m saying here. You can watch any presentation by James Simons and it’s the first thing he says, so it is obvious, but I suppose it needs more than one person to say it.

A lot of the scientists and mathematicians who have gone into financial markets are not sophisticated enough to grasp fully this point. They sort of felt that there are physical laws. In fact, the efficient market theory is the idea of a physical law. The mainstream have fallen into precisely the trap that I’m saying there’s no excuse for falling into. If you’re going into business that’s the first thing you should try not to fall into, is believing that you’re going into physics because you can use maths productively to improve your ability to make inferences, but it isn’t physics. It’s not.

Blunt. Direct. Learn from him.

More.

Source: Securities and Exchange Commission Historical Society, Interview with David Harding. Conducted on June 18, 2013 by Ken Durr.

Listen to my interview with the advisor Mark Kritzman in my podcast episode 605.

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.

Ewan Kirk of Cantab on Trend Following

Posted on by Michael Covel

Excerpt:

Our philosophy rests upon two main pillars. The first pillar is: macro, not micro. So we trade macro variables, not stocks and shares and credit default swaps and things like that. We trade across currencies, commodities, interest rates, bonds and equity indices. The second pillar is: a systematic approach, not a discretionary approach. So we describe our style as systematic global macro. Systematic trading involves coming up with a statistical model of the markets. Assuming that model has worked in the past, and that you have developed and researched and tested your model correctly, then your hypothesis is that it’s likely to keep working in the future. So the actual execution of trades is just continuing to follow what the model says. Now that sounds quite mechanical. In fact, it’s no different than the way any good investor works. Why would you invest with Warren Buffett? Because, over the past 30 years, Warren Buffett has made money, and you’re assuming that’s going to continue in the future. Conceptually, that’s no different than what we do.

When I use the term “scientist” to describe myself and my colleagues at Cantab, what I’m really talking about is a mindset. It’s a mindset of evidence based investing and using the scientific method to think about investing. The scientific method has worked pretty well for the human race for the last 2,000 years—it’s worked out better than superstition, anyway. And we believe in applying the same rigorous principles as in medicine or air traffic control. Everyone is quite happy with evidence-based medicine and air traffic control—would you fly in a plane controlled by someone who just had a gut feeling about where they wanted to go?

When people ask: What do you think is going to happen in the future? We always say: We don’t know. I can’t really project whether next year will be a good year for Cantab or a bad year.

Ignore at your peril.

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.

Higher Education… Not All it’s Cracked Up to be (Mailbag)

Posted on by Michael Covel

David Ricardo (19 April 1772 – 11 September 1823) was an English political economist, often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. According to an 1838 book, The Great Metropolis, Volume 2, Ricardo had certain golden rules:

“As I have mentioned the name of Mr. Ricardo, I may observe that he amassed his immense fortune by a scrupulous attention to what he called his own three golden rules, the observance of which he used to press on his private friends. These were: 1. Never refuse an option* when you can get it, 2. Cut short your losses, and 3. Let your profits run on. By cutting short one’s losses, Mr. Ricardo meant that when a member had made a purchase of stock, and prices were falling, he ought to resell immediately. And by letting one’s profits run on he meant, that when a member possessed stock, and prices were raising, he ought not to sell until prices had reached their highest, and were beginning again to fall. These are, indeed, golden rules, and may be applied with advantage to innumerable other transactions than those connected with the Stock Exchange.”

Building off that consider a story sent in from a listener:

Michael,

I live in Guernsey, which is a small island with several single track lanes in the rural parishes. I was driving yesterday when I came across two cars which were almost bumper to bumper. (I knew the lady driving the car going in the direction we were traveling in, she is a robust lady who is the wife of a close friend.)

Anyway the man driving the other car refuses to back up a few yards to a passing point, and is already getting out of the car, to argue with her, when I drive up behind her, she gave him short shrift and by the time he had acquiesced and decided to reverse a car had come up behind me and he had a lorry approach behind him.

He eventually reversed making a meal of this – and the whole process took a lot longer than it would have if he had just swallowed his pride and reversed immediately.

The moral of the story is – cut your losses short, before they have the opportunity to get your ego involved and the whole situation escalates beyond sensible proportions.

Kind regards,
[Name]

True that!

More feedback in:

Wish you and Taleb did a podcast together. Thank you again for not wasting my time talking about damn beer, the now cool thing to fill time on podcast.

[Name]

Beer is the cool talking point, eh? I am so far out of the loop!

More feedback in:

Hi Michael,

Firstly a quick thank you for all your books, most of which I own and have reread multiple times. I can’t overstate how invaluable they have been in helping develop my views and approach to trading. And thank you for all the other open source sharing of knowledge that you provide in your podcasts and trend following update emails, again I really appreciated them both for the information provided and for the motivation and new trading ideas they have inspired.

I know your views on tertiary education, however I was given an opportunity to study a Masters in Finance and am now mid way through the degree. I’m exploring ideas to focus my research on for my final project and want to use the project as an opportunity to deepen my understanding of the CTA industry. Ultimately I’m aiming for my project to have real value to someone within the industry by sharing new knowledge and insights or ideally providing a solution to an issue they face.

You have a deep understanding of the CTA industry and an amazing network of contacts so I wanted to ask you whether there were any areas you felt required further research. Otherwise whether there were any problems the industry faced that you or your contacts had identified that I could research and challenge myself to solve. I want my research to be relevant and offer practical application and value to the industry, rather than being exclusively an academic exercise so I would appreciate any feedback you could share.

Kind Regards
[Name]
Cape Town, South Africa

Thanks for your nice words.

I don’t have a research idea for you. But going through my world of books and podcast will push serious ideas I suspect.

More feedback in:

BTW, I like how you say PhDs are not necessary…I have a PhD in Microbiology and Immunology and a law degree, bought into the whole education thing. It’s fine as far as making a living but definitely not what it’s cracked up to be.

Indeed.

Michael Covel Trex
Michael Covel Trex

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.