Customer Reviews

Trend Following: How Great Traders Make Millions in Up or Down Markets, New Expanded Edition, (Paperback)

5 star:		(55)
4 star:		(12)
3 star:		(6)
2 star:		(14)
1 star:		(14)

 

 

What's great about this book is that it goes straight for jugular of anyone who can't stop themselves from making predictions about the markets. Like those chart reading traders who think they can actually forecast the market direction. Prediction with charts is a losing game. If 100 traders stare at a chart, they come up with 100 different subjective interpretations. This book may actually make them realize that pretending they have unique skill through years of ink blot study is just blowing smoke.

Better yet this book is not based off hypothetical testing or experiments in what may work. It uses real performance data from guys who have traded for decades as trend followers. If you worship technical indicators as "it" don't read this book unless you want a hard cold splash of reality. If you worship technical indicators as some market tonic -- go ahead -- but don't forget the best in the business do nothing of the sort.

One of my favorite parts is the description of the hundreds of millions of dollars trend followers won at the same time Long Term Capital Management was imploding and losing their shirts. Wow, what an example of risk and volatility in stark terms.

But ultimately it is the no holds barred condemnation of fundamental analysis that sticks with me. Trend followers don't waste their time trying to understand forces influencing market participants (fundamental analysis) They care about the market price and what they should do in response to market price movement. Isn't that a goal for all of us? Round of applause for the diligent research and clear writing.

Having been an active investor for over 20 years, I found the
material very enlightening. The basic strategy of trend
following opened my eyes to the opportunities in both bull and
bear markets. Wished I had read this book a few years ago!

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.

I heard about this book from a buddy of mine who trades using a mechanical system similar to trend following. Now I know why he recommended it. The book is a must read for investors and traders alike. Had I read this book three years ago I would have known why my investments were getting slammed by the bear. The author knows his subject inside-out and breaks it down in so many ways, I can't help but be embarrassed by my once magical belief in my broker's insight. I particularly recommend the chapter on behavioral finance that speaks to everyone who has had gut wrenching losing spells.

Every few years the geniuses is the financial press tell us that trend following is dead. In the late 1990's everyone swore that trend following was over, mind you in the midst of the largest bull TREND for Wall Street in years. This book brings clarity to a largely un-told subject. There are traders who silently profit over periods of time.

I found the chapter on Holy Grails particularly important. Buy and hold was finally tackled! Another key element in the book is absolute returns. Why compare your trading to the averages of Wall Street. Your return is your return.

I received my book on Monday afternoon. I could not put it down. Today (Wednesday) I finished it. Great read and well written!

This book serves a great purpose; it gives an insight into who is winning in the markets. We have all been lead to believe that Buffett, Soros and others are the big players in the market. There are others who are silently making money for customers without the fan fare of Buffett or the political bias of Soros. The book tells you who the major players are (Dunn for instance) and how much money they make over time.

Immensely readable, topics are presented in a straightforward and easy-to-understand style. The book shows that trading is a mental game - the real secret if there ever was one. But enough of my idle chatter, it's well worth your time.

For those of you who are lazy and do not want to do the hard work and simply want to gleem trading tips off a book, this is not for you.

However, for the ones who have an open mind, and would like to learn about WHY trend following works, this is the book.

I've read close to 100 trading books on various trading methods--fundamentals, technicals, options trading, etc. I trade and I would consider myself a trend follower--of sorts.

The author does make a good point--trend following is a valid and underestimated methodology. It is the method that discretionary traders like Edwards and Magee would advocate.

Trend following is based on events that the market underestimates. Price action does not follow the normal distribution, as the statisticians would have it. Events that are statistically improbable are much more frequent than chance would allow. Trend following technical analysis attempts to catch these moves.

The author underestimates the drawbacks of a strict trend-following methodology--large draw-downs, with a large percentage of losing trades. This drawback--low reliability is also a strength--most market participants are not interested in profitable system with a large number of losers. A more severe drawback--a large amount of capital is needed to trade such a system to handle the inevitable drawdowns.

He fails to address this issue by simply suggesting that if you take enough trades, eventually one will go your way and make up for your losses. Maybe so. But who would be willing to suffer draw-downs in the range of 30% or more, waiting for one or 2 big trades to come? Not many. Increased market volatility makes trend following systems profitable, but more risky.

If you examine _The Encyclopedia of Trading Strategies_ you will see that most mechanical systems degrade over time. Volatility breakout systems used to be very popular. But with increased volatility, simple breakout systems give more frequent losing trades, rendering them unprofitable for the test period.

The author overestimates the performance of mechanical systems, most of which are trend following. Historical testing tells you what has happened, not what is going to happen. This was the mistake of Long Term Capital Management. Trading, like poker, is a people game played with money. It isn't a number's game (like blackjack) the quants would have you believe it is.

Trading requires you to anticipate changes in investor expectations. Technical AND fundamental analysis helps you understand the forces that are influencing market participants. Understanding fundamentals can help you filter out the frequent false signals from technical models, while technical analysis serves as an excellent risk management and timing tool.

There are many ways of profiting in the market. Trend following is one. It isn't the best one, nor is it the only one. I'd argue traders would be better served focusing on classical technical analysis (chart patterns), and then spending most of their time learning how to manage risk. You can still make money with these "old" concepts, and gain practical experience with the psychology of trading.

I got this book a couple days ago and highly recommend it. As an occasional trader and avid reader, I pick up a few books about investing and the markets each year, but I seldom have the reading pleasure of being educated and entertained at the same time. This book does both. Covel manages to be a good storyteller and cover all the basics of trend following. Plus he's spent enough years researching the subject that it's hard to argue with his data. My only question is why aren't there more people trend following if it works so well? Covel names a few of the handful of trend followers who are making millions and none of them are on Wall Street -- very interesting. Bottom line: the quotes in the margin alone qualify this book as a good beach read.