Trend Following

Submitted by Book Library on 5 March, 2010 - 22:52

“Michael Covel’s Trend Following: Essential.” Ed Seykota, trend follower for 35 years and original Market Wizard. “A mandatory reference for anyone serious about alternative investments.” Jon Sundt, president and CEO, Altergris. “Michael Covel does an excellent job of educating his readers about the little-known opportunities available to them through one of the proven best hedge fund strategies.

This book is like gold to any smart investor.” Christian Baha, founder and owner, Superfund. “Covel has created a very rare thing a well documented and thoroughly researched book on Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets that is also well written and easy to read. This is one book that traders at all levels will find of real value.”John Mauldin, Thoughts from the Frontline

The Investment Strategy That Keeps on Making Money While Everyone Else Is Losing It: How Trend Followers Made a Fortune During the 2008 Stock Market Crash. Did your buy and hold investments survive the crash of 2008? While many were getting hammered, trend followers were earning profits ranging all the way up to +40% for the month of October 2008 alone! Now, the #1 guide to trend following has been thoroughly updated to reflect 2008’s cataclysmic events. Michael W. Covel reveals exactly how the trend followers achieved those amazing results. Using simple, up to the minute charts from top traders, he doesn’t just prove this strategy works: He shows why only a technical system based on following price trends can win over the long term.

Best of all, he shows you exactly how to apply the same strategies in your own portfolio so you, too, can keep on profiting no matter what happens next! For more than 30 years, trend following has been the one trading strategy that’s consistently delivered extraordinary profits in bull and bear markets. While most investors were losing a fortune in the 2008 stock market collapse, stuck in buy and hold investments, trend followers were earning huge profits...up to a whopping +40% in the single month of October 2008! The proof’s in this book: brand-new data you can view for yourself, plus all the information you need to know to utilize the same timeless strategies in your portfolio.

In this fully updated edition, trend following expert Michael Covel introduces the traders and fund managers who’ve been using this strategy for decades, adding brand-new profiles such as David Harding, who manages $10 billion plus dollars through his London-based trend following firm. Then, Covel walks you through all the concepts and techniques you need to use trend following yourself. One step at a time, one simple chart at a time, you’ll learn how to understand price movements well enough to profit from them consistently--in any market. Today, you need trend following more than ever. Read this book, and put it to work for you!

  • Real proof, real data, real results
  • Includes over a decade of detailed performance charts, updated to include the Fall 2008 market crash

  • All the Information You Need in One Number
  • Why the market price still tells you all you need to know to trade--and always will--in both bull and bear markets

  • Pinpointing Targets of Opportunity
  • What to trade, when to trade, and how much to trade

  • Meet Today's Leading Trend Followers
  • Extraordinary trader profiles, from David Harding to John W. Henry to Ed Seykota

Positive Review of Book Trend Following

Frankly, I didn't expect a lot from this book given the title. I tend to be more than a bit Leary of those wild claims on how to make millions etc. Don't get me wrong, I like to make money from a good investment now and then myself but typically the bigger the claim the harder they fall. Fortunately, every once in whale an author comes along that is able to effectively communicate complex information in an easy and enjoyable manner without insulting the intelligence of the reader. Covel is one such author.

The book demonstrates the authors knowledge and insight without being a 'me-me-me' book, it's HIGHLY engaging and readable, consumer friendly but equally likely to appeal to veteran investors and - best of all - doesn't scrimp when it comes to information. All too often authors try to make a book out of what really should be a glorified paper or article. this is not a fluffed up article but a real book packed with great info, no small feat when you consider I write and teach biz topics for a living. To put it into perspective, if a book can give me one new idea or spark of interest then I consider it time and money well spent. On the other hand, very few books are "keepers" - there is rarely enough good information to warrant keeping a book. This one is a keeper. This book is a welcome change from the pure fluff from most investment books on the market today. Here's why.

A lot of information packed into a small space. The book does NOT have big font filled with redundant graphics or cute cartoons - it DOES have over 400 pages of dense text filled with solid information. Unlike most books where the reader is fortunate to find one or two solid nuggets of information - this contained quite a bit that sparked my interest. Many investment authors have gone 'lazy' and provide little in the way of additional references or resources. This book includes them all. By far the most important factor of this book is the relevance to the current economic crisis. Undoubtedly, the idea that "die and hold" may not be the holy grail of the future in terms of investing will be a hard pill for many to grapple with - I will leave it to the reader to determine if they agree or not however, even if you were to disagree the book is STILL well worth the read! The case studies are equally important especially in the way the author uses them to support the position being made but so very enjoyable in their own right. What can I say the quotes throughout the book were great! They added that little something extra to keep it enjoyable without detracting from the substance.

Without insulting the reader, the author manages to provide a synopsis or key points throughout the book. It's a great way to review or look-up important bits later especially considering the book contains a great deal of great information. Whether you are a novice or veteran investor you will likely find something of interest. The book does not try to be all things to all people so therefore you may disagree with some of the basic information or premise presented by the author however, the book is still well worth the time to read. Finally, I was not familiar with the author prior to this book review but found it an exceptionally enjoyable read.

Negative Review of Book Trend Following

I bought this book thinking it would provide tips and techniques for identifying trends in stock prices. Not useful for that purpose. A lot of historical information but no useful explanation of systems and techniques for sporting trends in stock prices.

Author Biography

Michael Covel is a highly respected author, director, and entrepreneur who founded the internationally known website in 1996. Covel’s first book was the best selling Trend Following: How Great Traders Make Millions in up or down Markets (FT Press April 2004 and November 2005 Expanded Edition). The book profiles great trend following traders who have won millions, if not billions, in the market. The original edition, expanded edition, and paperback edition have sold 100,000 plus copies. It is also available in German, Japanese, Chinese (complex and simplified), Korean, French, Arabic, Turkish, and Russian.

Covel’s second book The Complete Turtle Trader: The Legend, the Lessons, the Results (Collins, October 2007) is the definitive inside look at the legendary trader Richard Dennis and his student traders, ‘The Turtles.’ The book has received wide acclaim and is headed toward bestseller status. It is also available in German, Korean, and Chinese (complex and simplified).

Building off his book success, Covel wrote, directed, and produced a theatrical release documentary titled Broke: The New American Dream, built around the subject of behavioral finance, specifically investigating the 2007—2008 market crisis and crash. Face-to-face interviews with Nobel Prize winners Dr. Harry Markowitz and Dr. Vernon Smith, famed mutual fund investor Bill Miller of Legg Mason, David Harding of hedge fund Winton Capital, plus dozens of other Wall Street pros, along with average investors were conducted over 2007 and 2008. The film was shot in New York, DC, Miami, Dallas, San Diego, Baltimore, Las Vegas, Richmond, London, Tokyo, Singapore, Macau, and on a sheep farm outside of Harrisonburg, Virginia.

Not afraid of a crowd or controversy, Covel is known for engaging and provocative speeches presented to audiences from Tokyo to Paris to Macau (China) to Vienna (Austria) to Hong Kong to Dallas (US). His writings have appeared in Trader Monthly Magazine, Stocks, Futures and Options Magazine, Futures Magazine, Technical Analysis of Stocks and Commodities Magazine,, Yahoo Finance, Market Technicians Association Newsletter, and Futures Japan Magazine. Covel has been quoted and interviewed by likes of Bloomberg Radio, Technical Analysis Magazine, Barons, and dozens of radio programs. Covel can be reached directly at

Table of Contents

    1. Trend Following
    • The Market
    • Winning Versus Losing
    • Investor Versus Trader
    • Fundamental Versus Technical
    • Discretionary Versus Mechanical
    • In Plain Sight
    • Change
    • Modus Operandi: Price
    • Follow the Trend
    • Loss
    • Conclusion

    2. Great Trend Followers

    • David Harding
    • Bill Dunn
    • John W. Henry
    • Ed Seykota
    • Keith Campbell
    • Jerry Parker
    • Salem Abraham
    • Richard Dennis
    • Richard Donchian
    • Jesse Livermore and Dickson Watts

    3. Performance Data

    • Absolute Returns
    • Fear of Volatility and Confusion with Risk
    • Drawdowns
    • Correlation
    • Zero Sum Nature of the Markets
    • George Soros and Zero Sum

    4. Big Events, Crashes, and Panics

    • Event #1: 2008 Stock Market Bubble and Crash
    • Day-by-Day Analysis
    • Event #2: 2000-2002 Stock Market Bubble
    • Event #3: Long-Term Capital Management Collapse
    • Event #4: Asian Contagion
    • Event #5: Barings Bank
    • Event #6: Metallgesellschaft
    • Final Thoughts
    • The Always “New” Coming Storm

    5. Baseball: Thinking Outside the Batter’s Box

    • The Home Run
    • Moneyball and Billy Beane
    • John W. Henry Enters the Game
    • Red Sox 2003-2007

    6. Human Behavior

    • Prospect Theory
    • Emotional Intelligence: Daniel Goleman
    • Charles Faulkner
    • Ed Seykota’s Trading Tribe
    • Curiosity Is the Answer, Not Degrees
    • Commitment to Habitual Success

    7. Decision Making

    • Occam’s Razor
    • Fast and Frugal Decision Making
    • The Innovator’s Dilemma
    • Process Versus Outcome

    8. Science of Trading

    • Critical Thinking
    • Chaos Theory: Linear Versus Nonlinear
    • Compounding

    9. Holy Grails

    • Buy and Hold
    • Warren Buffett
    • Losers Average Losers
    • Crash and Panic
    • Analysis Paralysis
    • Final Thoughts

    10. Trading Systems

    • Risk, Reward, and Uncertainty
    • Five Questions for a Trading System
    • Your Trading System
    • Frequently Asked Questions

    11. The Game

    • Slow Acceptance
    • Blame Game
    • Understand the Game
    • Decrease Leverage; Decrease Return
    • Fortune Favors the Bold

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