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The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk Hardcover – December 17, 2012


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Product Details

  • Hardcover: 224 pages
  • Publisher: Wiley; 1 edition (December 17, 2012)
  • Language: English
  • ISBN-10: 1118407741
  • ISBN-13: 978-1118407745
  • Product Dimensions: 9.1 x 6.1 x 0.8 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (30 customer reviews)
  • Amazon Best Sellers Rank: #781,357 in Books (See Top 100 in Books)

Editorial Reviews

From the Inside Flap

There is no easy way to make money in today's markets. If you're looking for get-rich-quick advice or the holy grail of trading, the only thing you're really doing is wasting time and money. In order to truly excel at this difficult endeavor, you have to work hard, stay focused, and follow a method that will put the odds of success in your favor.

Nobody knows this better than author Andrew Abraham—a commodity trading advisor with over eighteen years of experience using trend following techniques to compound wealth and manage risk. And now, in The Trend Following Bible, he shares valuable insights, from the perspective of a professional who trades for a living, of what you need to know and internalize to become a consistent and successful trend trader over time.

Written with the serious trader in mind, this unique guide skillfully puts trend trading in perspective. It discusses the development of a robust trading plan, which is applicable to all time frames and markets, details how to manage the inherent risks of trading, and reveals how important patience and discipline are in order to see your plan through.

Along the way, Abraham explains the psychology behind successful trend trading, provides practical examples of traders who have applied it, and addresses the underlying principles you'll need to know in order to make this approach work for you—from trading the best markets, betting small, and using stop-losses to trading with the trend, cutting losses, and avoiding overtrading.

Trend trading is a journey filled with ups and downs. But by taking the ideas found here, and applying them to your own personality and risk tolerance, you'll discover what it really takes to capture trends and make money with them in the long run.

From the Back Cover

Praise for The Trend Following Bible

"I like Andy's statement that trading has to fit one's personality. Everyone is different. I've met quite a few successful traders over the twenty years I've been trading professionally. Ironically not one person uses the same system. What Andy does capture are the true building blocks of building a successful trading system."
—Ken Kinkopf, President, Kinkopf Capital Management, LLC

"I have been registered in the futures industry since 1987, and the information on trend following provided by Andrew Abraham is some of the most comprehensive and easy to follow that I have seen. Andrew provides pure information with no hidden agendas. He does not hide the risk nor simplify the work a trader needs to do. Discipline and patience, two of the most key elements in money management, are stressed. I would highly recommend that anyone serious about trading should read this book."
—Chuck Bohm, Pioneer Futures Inc.

"Where I feel that Andy's insight is so valuable is that he is an active practitioner. He gives us views, and posts articles, that highlight the discipline and self-belief needed to be successful in this arena. Trend following sounds so simple; looking at a chart is easy to say, in hindsight, that we would have bought there and sold here. Now tell me where we are going tomorrow. Andy's blog shows us that trend following is about percentages. Increasing your chances of calling the future direction of a market correctly over time, and having an exit plan in place before one takes a position. I encourage anyone with exposure to the markets, regardless of experience, to read this!"
—Benjamin Smith, ADM Investor Services International

"The best investors are not afraid to share their trading plan with others as they know that there is no secret recipe in all this, that risk management and discipline are really 95% of the battle. Clearly Andy is not afraid of providing his."
—Gerald Rehn, Principal, Rehn Capital Management, LLC

"Andy gives a structured, simple, and concise way to understand trend following and, most importantly, the discipline and patience this strategy needs in order to work. I really enjoyed his personal views and risk management tools that have kept him in trading for many years."
—Eduardo Frid, EF Financial Services

"Right on Andy!"
—Todd Miller, Availeth Capital, LLC

"Andy's explanation of trend following is extremely informative and should be very useful for any individuals who hope to begin trading in a trend following strategy. One of my favorite aspects of his book is that he is relaying the message that trend following and trading are, indeed, work. So many individuals have the wrong impression entirely as to what it is that a trader or trend follower does with his or her time. As with any other career path, trading takes time, research, and extraordinary effort in order to be successful. I would highly recommend that any individual interested in trend following read Andy's blog as well. The information is accurate and effective."
—John David McDonnell, RCO Financial, Inc.


More About the Author

The Bible of Trend Following - How Professional Traders Compound Wealth and Manage the Risks
Wiley Books
The Bible of Trend Following Foreword

I've been trading for investors for over 30 years. My first fund, Tactical Commodity Fund started in mid-1981. Tactical's current program began in 1993 as an offshoot of that first fund but with lower leverage and some evolutionary changes. I've learned a lot over the years. I've seen a lot of markets, a lot of bull moves, a lot of bear moves. And I can tell you I wish I had read this book 30 years ago. I would have made more money, especially near the beginning. Do yourself a favor. Read it. Now.

My trading-for-investors career began not long after gold peaked around 870 and a bit over a year before the S&P bottomed near 100. I subsequently watched gold drop more than 70% over 19 years and then rally over 700% in the next 12. I watched the stock market rally for over 17 years with just one big, brief pullback along the way only to witness two retracements greater than 50% in the next 10 years.

I've seen almost too numerous to remember booms and busts in the commodity, currency and interest rate markets. I've seen things happen that everyone said never would and watched as things didn't happen that everyone said were inevitable. I've traded and held positions in these markets nearly every single day since mid-1981.

Tactical was one of the first systematic, computerized fund managers. We started out on a Radio Shack TRS 80, before the first Apple. Historical data that costs pennies now took months to type in by hand. We ran Fourier transforms and proved there were in fact no repeatable hidden cycles in the markets while everyone else was still talking about them. We tested all the market lore to see what was true and what wasn't. We tested the early mechanical systems that were touted and found most of them didn't hold up. Indicators that people still use today we learned years ago don't really give you a statistical advantage.

I wrote my own back testing software and tested everything I could think of. When personal computers advanced we bought the latest. For a number of years we had two Sun workstations running 24/7 doing systems testing when those were state of the art. Of course now you can do the same things much faster on a laptop. But that was then and this is now. We kept testing. We kept learning.

I read every book I could get my hands on about trading. I listened to the old traders. When I worked during summer breaks in college at a brokerage firm at the Chicago Board of Trade I kept my ears open as the old timers related their adventures, their successes, their failures. I tried to understand the psychology of the winners and how it differed from the losers. I got the idea that the psychology of the trader was as important if not more important than anything in success or failure.

I spent a lot of time learning things the hard way, a lot of trial and error, a lot of hard knocks. Trading is still a lot of hard knocks. Drawdowns can go on seemingly forever. You can have days, weeks, even months on end without much in the way of profits. It can feel like you are a punching bag or a movie double who takes all the hits. But that's the nature of the game, of the business.

Even after you've learned how to do it, you still take your hits. To succeed you just need to stand up every time you get knocked down. You need to have the confidence that standing up is the right thing to do. You need to know when to stand back up and how. And just by standing up again and again and staying standing as long as you can before you get hit again, well, you can actually make more money than you lose over the long run in trend trading. It's quite the amazing process.

Very few people succeed in this process. The learning curve is too steep and the correct psychology is too hard to implement. If you have any attachment to making money, and who doesn't, it is very tough to trade correctly.

This brings me to the book you hold in your hands. To reiterate: I surely wish I had it 30 years ago. It would have saved me a lot of work. And I would have made more money, especially in the early years. More specifically I would have lost less money and that would have put me farther ahead today. Andy Abraham has written a gem. His writing style is enjoyable, clear and entertaining. He covers all the main ingredients needed for successful trend trading. He tells the truth.

What impresses me most about Andy's writing is his honesty. He doesn't sugar coat things. He doesn't tell you it's easy to make money. He tells you that you need patience and discipline. (By the way "Patience and Discipline" has been Tactical's slogan since its inception.) Andy tells you drawdowns and losses are part of the business. He presents a track record of one of his own programs that he started just a few years ago that has not made new highs in 17 months. That's exactly how it works sometimes. What is so refreshing is Andy's honesty about it. The man has integrity.

A characteristic of those traders who have been successful over many years is honesty with respect to their trading. You need to understand your own psychology, where you are mentally strong and weak, how you deal with baser emotions, particularly fear and greed. If you lack honesty with yourself you will almost certainly fail. Andy's honesty, more than anything, tells me he understands trading psychology and gives me confidence he is qualified to teach others what he knows. I have yet to run across a trading book that emphasizes the psychological aspect of trading better than this one.

This book is not a cookbook. It does not outline a mechanical system. It explains the psychology needed to succeed in trend trading, gives some examples of traders who have applied it and sets out the underlying principles which should be followed for success-- trade the best markets, trade with the trend, bet small, use stop losses, cut losses, ride winners, don't overtrade, be patient, be disciplined.

As a bonus, Andy gives you the scaffolding for a particular methodology that works for him as an example of everything he sets out in the basic rules. Just as you would never think of moving into a new house that has been framed but before the roof, walls and interior are finished you cannot and should not attempt to trade Andy's "system" without doing all the finishing carpentry. You need to do your own back testing--doable these days with off the shelf software he describes--to fill in the parameter values and to learn how his trade-the-best market portfolio ranker shuffles which market signals you take. For those who don't have a clue where to begin Andy gives you his exact pattern to follow. Your own back testing fills in the parameter blanks.

Andy advises everyone that they must trade a style that fits their personality. I believe very strongly he is absolutely correct. You will not follow a system that does not suit you. In his wisdom Andy thus does not give you all the parameter values for the formulas in his personal trading scaffold. He wants you to do your own back testing, to find a methodology that you are comfortable with yourself and have confidence in. When all is said and done your approach may be identical to his with your own parameter values. It may be significantly different. Regardless, you cannot develop the confidence to pull the trigger after multiple losses in a row without having done the work yourself. Guaranteed.

It's a fair bet to say that any trend following methodology likely to succeed over time will employ the general psychological and fundamental trading rules Andy outlines. The specifics of everyone's approach will vary, but the broad principles outlined here will be present in one form or another in virtually all robustly successful trend following approaches. People say that markets have changed and new rules are needed for the new game. I've heard that for over 30 years. The markets do change but the underlying fundamental rules for success don't seem to. They are all outlined here. How great.

You are lucky to have picked up this book. If you are a seasoned trader, reviewing the basic elements of winning psychology makes this book worth perusing cover to cover. We can all use reminders, yours truly always. If you are new to trading this book can save you years of trial and error and monetary losses. This book is now on my short list of recommended reading material for traders. I sincerely thank Andy for having written it. Have fun reading it. I wish you all the best in your trading.

Dave Druz
Tactical Investment Management
CTA / CPO since 1981
Haleiwa, Hawaii
April 2012

Bio


I have been investing in commodities,hedge funds, real estate, debt instruments and managed futures since 1994. My goal has been to compound money over time. I am a trend follower. I do not predict but rather make myself available when trends appear. I have built trend following programs as well as allocated to commodity trading advisors & money managers who think the way I do as far as risk. I have seen what it takes to be consistent, successful & able to compound money over time by emulating successful traders and investing with long time money managers & commodity trading advisors. I know what has the potential to work over time & more so the pitfalls to avoid. Investing with others as well as our own trading has enabled me to compound my net worth and is a lifetime strategy. My trend following programs have been an evolution of seeing virtually every mistake possible and building a model that mitigates these mistakes. I look at over 80+ liquid markets and look to buy the strongest markets and sell the weakest. Multiple systems with a stringent focus on risk assists us in our goal of compounding money. There is no Holy Grail or magical system. It is rather a robust idea that can trade all markets and time frames the same based on heavy risk management & most importantly a proper mindset common in successful trend followers.I am a trend follower with a strong focus on risk. I don't just focus on the returns I focus on how much risk is taken to achieve those returns. In order to smooth out returns I also invest with various commodity trading advisors. I have been investing in Commodity trading advisers, hedge funds ,real estate, debt instruments since 1994. Was prior a Registered Investment Advisor & a NFL players financial advisor specializing in value investing tenents based on Benjamin Graham as well as hedge funds and fund of funds. My premise is to maintain wealth and compound money over long periods of time. Trend following offers the transparency and liquidity & has become a life long strategy.

There is no Holy Grail or magical system. It is rather a robust idea that can trade all markets and time frames the same based on heavy risk management & most importantly a proper mindset common in successful trend followers. My passion is researching & testing trading systems. I am blessed to have an outstanding programmer with over 25 years experience on my team. My goal is to have world class trading systems that my family can invest in.

Customer Reviews

Why make a book with this kind of info so small in print.
James T. Wolf
Abraham provides great insight into thinking and psychology, money management and great guidance on using trend following systems.
Keith B
I encourage anyone with exposure to the markets, regardless of experience, to read the material!
Broker1

Most Helpful Customer Reviews

21 of 26 people found the following review helpful By Scott's Investments on January 22, 2013
Format: Hardcover
Andrew Abraham is a commodity trading advisor who has traded professionally for 18 years. He specializes in trend following strategies and recently published The Trend Following Bible.

The author profiles successful traders and warns of false messiahs and "geniuses" in the early part of the book. Abraham clearly states the objective of the book (always the first thing I look for!), but does not do so until page 79, which makes the "introduction" lengthy and repetitive. He promises to show readers how to have an exact trading plan, how to take low risk bets, how to take losses, how to allow profits to run, and how to develop the proper mindset of a trader. These are worthwhile topics and in short I believe he achieved those objectives despite some of the other shortcomings of the book.

His trading plan begins with a discussion of risk and capital management. He then shows how he identifies trending markets, including his use of Rate-of-Change (ROC) and MACD. He then shows precisely where he places his hard stops and trailing stops and how he takes profits.

Abraham's objective was not to sell his exact trading system to his audience, but rather his process. He encourages readers to create a system which fits his or her personality. As he states "strategies do not make good traders". He also notes that the tenets of trend following are simple and intuitive but in practice difficult to apply due to our own fear and greed.

Abraham repeats many trading psychology tips and tricks in an effort to help develop the proper mindset of a trader. While he repeats many of the same slogans pertaining to discipline and patience, they are worth repeating because they are so crucial to long-term trading success.
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2 of 2 people found the following review helpful By Michael E. Strupp on December 28, 2013
Format: Hardcover Verified Purchase
I have a lot of respect for Andrew Abraham as a veteran trader who is passionate about the markets, has talked to lots of traders, and is willing to share the hard-earned insights he has gained through years and years of trying to grinding out profits in the market. His dedication to sharing his craft is admirable and commendable.

You will find a some really good trading gems in this book, and some well-deserved discussions regarding how hard it is to trade and make money year in and year out. I wish more trading books placed such emphasis on the "realities" of trading. As Andrew points out, if you're new to the markets and expect to make 50% to 100% per year using someone else's "trading robot", you are deluding yourself. Trading is a tough and ugly business, by far the hardest "easy money" you will ever make. The chapter on "The Trend Follower Mindset" was especially good - anyone who wants to trade systematically should read this chapter and take it to heart. In fact, you should probably read that chapter twice.

My sole disappointment with this book is just how poorly it is edited. I don't know if the responsibility for this rests on the writer, or the publisher (or more likely, a combination of both), but at points it feels like the author is rambling, almost to the point of incoherence.

Let me give you one example: in Chapters 7 and 8 ("trend breakouts" and "trend retracements"), the author spells out pretty clearly his methodology for trend trading the markets. He lays out his rules and he provides examples for how he trades. However, in Chapter 9 ("The trend following mindset"), on page 138, he writes: "My goal is to enlighten you and teach you what it took decades to learn.
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2 of 2 people found the following review helpful By Andrew Jenkins on October 19, 2013
Format: Hardcover Verified Purchase
I rated this 5 stars because I am someone that is looking to seriously create a trading plan to get a consistent return of my trading over time using a trend following methodology. Andrew Abraham delivered an out of box trading method that he has used to generate returns for himself over 18 years. Using a combination of Andrew's methods mixed with the understanding of some market psychology and discipline found within yourself can actually work! I liked this book because it reinforces the trading methods I was introduced to through Michael Covel's books which I highly recommend and I was searching for more like minded traders and read Andrew's book who actually recommended Covel in this book.

Trend Following Bible is about 200 pages worth of information with what sort of mindset/psychological makeup you should have as a trader, proving the successes of others over long periods of time with compounding returns, his trading method, and guides you along your path. From my experience reading there is no book out there that is a "holy grail" that just by simply reading will show you how to "win" at trading, but this one comes pretty close.

If you are not wanting to put in any time in doing your own research and using your knowledge learned to develop your own rules and stick with them then this book is not for you. This book is guidance for people that are serious about trading and will help your learning curve. If you are looking for trading tips to get rich fast then you would be better off to not start trading at all.
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