Trend Following: How Great Traders Make Millions in Up or Down Markets

by Michael W. Covel

Book Overview

In this guide, Covel introduces the fundamental concepts and techniques of trend following and shows why market prices contain all the information investors need and how to understand price movements... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0131446037
• ISBN13: 9780131446038
• Release Date: January 2004
• Publisher: FT Press
• Length: 311 Pages
• Weight: 1.93 lbs.
• Dimensions: 1.1" x 7.3" x 9.5"

Customer Reviews

Beginner? Frustrated by Losses? Read this book.

I've been trading options for about a year. Most of what I know has been self-taught by reading and researching online. Trend Following challenged a lot of the "traditional wisdom" that I was taught by others during my research. What I learned by reading this book was: All markets trend -- up, down or sideways. The trader that learns how to spot these trends and capitalize on them profits. Losses are a part of life -- Sometimes, you will be in a situation that you will lose money. Instead of worrying about "a what if" situation, one should cut their losses and move to the next opportunity. Don't worry about the "would, could, should". Focus on reality -- Again, instead of hoping for a stock to turn around. Close your position, learn from your loss and move to the next opportunity. Most people think about how things could be, instead of what they currently are. This clouds their judgement and causes them to take on too much risk or continue to hold onto a stock for no rational reason. After reading this book, my style of trading has changed. No longer tie up my capital for months in a position while it continues downward. I've set firm metrics to measure performance by and if I'm not meeting those within a specific time frame. I exit and move on. I'm not as stressed about my losses and when I am profit I don't leave myself exposed to a sudden change in the market. I definitely recommend this book for anyone interested in trading.

Connecting with Trends

I bought this book because I want to know "Can I learn to earn a living by trading?" In this book, I learned about others that learned to trade, and how to think and listen so that I might learn too. Through this book, Michael took me in depth to hear what successful trend followers say about their craft, and how to interpret what they say. I believe many people hear what the trend followers say, but miss the message. Michael took example after example of successful trend following, lined them up, and showed me how to think in a way to get the message. Part of my mind still wanted the book to list out the formula for a trend following system that would work best for me. I found the experience of wrestling with that part of my mind key to digesting the message of this book. That part of my mind that feels unwilling to do the work to create a system that works best for me blocks me from building the system. Not that the book left me without a framework for my trend following system. I found the book well organized into four parts. Michael devotes the last hundred pages to seven valuable appendices. There I found trend following systems and examples of how to evaluate them. Through studying this book, I gained lessons and confidence that propel me towards earning a living by trading. This book returns high value for the cost.

Great and highly informative book on the topic!

First of all, I do have to admit that I am wary of any book, seminar, or advertisement that says "Learn to make millions ...", and so as I started reading this book, I hoped that there was not too much hype built into it. I was pleasantly surprised by the amount of useful information, well-researched anecdotes, and multitude of references to outside sources that the book presents. Alas, I probably have, in the past, belonged more in the "investor" category than the "trader" category, and I am guessing that I got more out of this book that some traders who manage their portfolios on a weekly or daily basis. This is not so much a how-to cookbook, and there are no 12-step plans to make your millions, but I found its presentations of trading philosophy highly thought-provoking and, given the market crash of 2008, motivates me to go from being more of a moderately-engaged investor to looking at my portfolio more as a highly-engaged trader. It was a very useful, and timely, read for me!

Tired of the games?

Why should you read this book? Is the book worth the time and effort? The book layed the foundation for my trading career. Brick by brick and chapter by chapter the author supported why trading as a trend follower is so important. Examples of the successes of current trend followers are peppered through the book. Does the author give you the secrets to trading? No. Are there any secrets to trading? No. Buy if the price is going up and sell short if the price is going down. Is it that simple? Yes. The author goes out of his way to show example upon example of successful trend traders. These traders are not Wall Street names. They do however, beat the S & P on average year after year, and do so very quietly.What does it take to be successful? How can I be successful? Simple, find someone who has what you want and then model their behavior. Find a mentor. If you want to make money in the markets then model the behaviour of those who are successful. Granted most of these traders would not take you under their wing, so buy the book and let it serve as your focus. Their behavior is thoroughly outlined through the pages.People with nothing to say always talk the loudest. In trading the ones who have nothing yell.

Trend Following and Baseball

You don't have to be a trader to enjoy this book, but it helps if you are a stat-head and know your baseball. In one chapter Covel uses the game to break down trend following and how it works. I knew John Henry as the owner of the Boston Red Sox but when Covel explains how Henry who is a trend follower, uses the same strategies to run his baseball team that he does in trading, that was when I appreciated what he was talking about. Here's what I mean: "part of the problem from John W. Henry's perspective is baseball's old guards' love of the Adonis athlete over pure production - hitting, power, plate discipline. Are you smarter than the market? If you could find the data that would prove otherwise but still enable you to win, would you be able to set aside your ego and play the game by a set of rules? If so, you might be on the same path as John. W. Henry." But even if you're only a marginal fan of baseball, and you're an investor, you should still read this book. It pitches a basic truth about investing that anyone can use. If you have enough good data like baseball has stats, you can use that data to make profitable investments if you have discipline. In my opinion that's sound economical advice.