Customer Reviews

Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets

5 star:		(99)
4 star:		(37)
3 star:		(7)
2 star:		(18)
1 star:		(16)

 

 

I believe the positive review on this book are questionable. It was a huge waste of my time. The book has information about trend followers, who they are, why the do it, why they prefer following price over fundamentals, etc. I believe all that. It also talk about the fact trend follows have risk management systems, why they are important, but doesn't say what those systems are. Nor does it explain how to be a trend follower, what to look for, how to create a system, what risk management looks like. Its 200+ pages that says a lot of nothing. Sure, there are people that follow trends and make huge money doing it. But it does not say how to be a trend follower, or how the average person can buy commodities, FX, futures etc, the markets trend followers use. I hate books that promote stuff, but then don't actually tell you anything or how to do it. It does suggest that stocks are the hardest asset class to be a trend follower, but then an appendix had an interesting study that supported trend following in stocks. So who knows. But don't promote trend following if you're not going to then at least suggest resources of how the regular investor (the person this book is directed towards) can buy commodities, fx or futures and be a trend follower

If you're looking for strategies about trend following, when to buy or sell, which type of strategies to follow, which strategies successful trend follower use, don't buy this book. It does not disclose anything about trend following systems. I'll summerize...trend following exists, some people make huge money doing it, they view the world this way. That's it.

I firmly believe that this book is highly ranked because the author is a successful and smart marketing individual. He knows how to promote a product, but does not deliver on the value proposition that product offered. Not surprisingly, he also offers expensive on-line programs and class on trend following, a website, and even has an upcoming self-produced documentary. Its a full-court press to sell the idea of trend following, but does not share how. I suspect, hedge funds or CTAs buy this book and give it to clients because its marketing fluff that validates what they do, without saying how they do it. But that it does not make it a valuable book.

Admittely, I'm always skeptical of authors that write about investing. They are making money by selling books not by investing. For more interesting books written by authors that discuss investor, Jack Swagger's New Market Wizards at least provides more insight into the strategies successful investors follow. So too does the "little black book series".

Ironically, I am a trend following. Its something I believe does work for certain individuals. I was hoping to learn more about the strategies of rock-star trend followers, or ideas to help refine my investment approach or strategy. But this had zero information on the actually strategies, process, models, or even how to create a model.

Trend Following is the sort of book that can either be very rewarding or very frustrating. If you pick it up thinking it's going to provide some secret methods and techniques for trading you are going to end up being one of the folks who ends up panning it because they didn't get what they expected. This is not a technical manual full of strategies. If you understand that going in you'll get a lot more out of it.

This book, to my mind is like a trading version of a text exploring a specific philosophy such as Taoism with something of a comparisson to Buddhism, for example. Trend Following describes the philosophy and highlights some of its promonent proponents. And just like most books on philosophy, it sets you up for further exploration rather than presenting you with a "how to" instruction.

I think if you have the philosophy mindset going in it will go a long way toward helping you find value in the book.

I Thought I had seen and read just about everything to do with trading. From histories of great traders, complicated option formulas, economic theory, the meanings of government statistics and more. Hearing about Covel and reading some of his shorter posts I kept wondering how something as simple sounding as trend following could be a whole book. After finally reading it hardly a day goes by that I'm not thankful for letting "Trend Following" showing me how simple it can be.

Excellent Book! It challenges the conventional television pundit/CNBC wisdom and approach to succesful trading and traders. Covel is effective in cutting through all the barage of fundemental data and boiling it down to simple and reliable truth: Price/Momentum/Trend. You will be encouraged, educated and equipped!

Mchael did a very good job in putting this piece together. This is NOT a "how to" book so if that's what you are looking for you will be disappointed. However, it is full of philisophical quotes and commentary from some of the best trend following traders. It's a must read for anyone seriously looking at trading as a business venture. The subject matter is well-researched and is a good 'opening introduction book' for the novice trader. Great work Mike!

This review is unlikely to make me friends, and likely to generate some negative mail. Let me start with the conclusion: don't buy the book. That said, my reasons for stating this are different from those who typically criticize Michael Covel. I agree with much of what he says; I disagree with much of his rhetoric. Let me give you my thoughts:

1) Momentum is a pervasive factor in the markets. It works about 80% of the time and produces significant excess returns on average. Behavioral finance points out that people are slow to adapt to new information, so momentum tends to work because the initial moves on new information aren't sufficient. That said, when too many are chasing momentum, the market becomes extremely volatile, and the strategy ceases to work, until it shakes out enough momentum-followers.

What is hard, is distinguishing trend following from technical analysis from momentum. Personally, I think momentum explains the other two. It's a much simpler theory, and much as Covel appeals to Occam's Razor, I apply it back to him here.

2) He draws on a series of investors that have done well in the past, and touts them as proof of his theories. Hindsight is 20/20. What of those that have tried to apply trend following and failed? Is it many or few? Keeping a tight stop loss for some means the death of a thousand cuts. The studies that I have seen show that frequency of trading tends to decrease returns. Now, trend following does not necessarily mean a lot of trading, but for many it ends up being that way.

It is easy to locate a bunch of trend followers in hindsight, and tout their abilities. What would be harder would be to find the whole universe of people following trends, and see how they do as a whole.

3) Mean reversion is a weaker factor, but still significant in making money. Value investors typically do well with it, but only reliably when they insist on strong balance sheets. I've studied mean reversion for years, and it exists in almost all markets as a weak factor. Over enough time, that weak factor has punch, but in the short run, momentum rules on average.

4) Covel spends a lot of time trashing fundamental analysis, without much meat behind it. Fundamental analysis works well, but doesn't have so much value because so many are applying it. It's not like the situation Ben Graham found, where few were doing it.

Aside from that, technicians implicitly rely on fundamental analysis, because their support and resistance levels stem from the decisions of fundamental investors. Same for those that follow trends. The trends exist because fundamental investors react slowly to changes in the fundamentals, and trend followers exploit them.

5) There is no mention of the Adaptive Markets Hypothesis, and little discussion of Behavioral Finance. These are much richer theories that encompass "trend following."

6) Covel takes "pot shots" at Buffett over issues that are unrelated to his main point in an effort to discredit him. Buffett is a bright guy who can criticize derivatives in aggregate, while still using them in specific to his advantage. (Cough, cough. Please ignore his put option trades.)

7) There was not enough time spent on "how to trend follow." After reading the book, if I didn't have prior background knowledge, I would be scratching my head to figure out how I could reliably pick investments in a trend following mode in order to make significant excess profits, as well as know where to sell them.

I don't recommend it, but you can buy it here: Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets

Final note -- Covel needs to grow up and learn that there are other factors in the market aside from momentum. He has become a fundamentalist about "trend following" and does not seem to have the open mind that he harps about.

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Note: this book review generated a lot of controversy when it was published, so there are four follow-ups:
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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 awhle 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...

1. 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.

2. Endnotes. Many investment authors have gone 'lazy' and provide little in the way of additional references or resources. This book includes them all.

3. Relevant. 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.

4. Quotes. 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.

5. Key Points. 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 thie author prior to this book review but found it an exceptionally enjoyable read.

Bottom line - Good stuff and a keeper!

Michael Covel is out to save you! He wants to free you from worrying about every little news item that shows up in the WSJ or on CNBC. He'll show you how to stop wasting time trying to make forecasts. And, best of all, he knows how to make money in both advancing and declining markets. Sound good to you?

Well, don't get *too* excited. Trend Following is not a how-to-guide. It doesn't contain any trading "secrets" or tricks. It's really a foundational text that thoroughly describes the philosophy and concepts underlying a trading system driven solely by price trends. Covel uses both hard data and anecdotal evidence, with a strong emphasis on behavioral finance concepts throughout, to make his case.

Keep in mind that if you end up being convinced by Covel, you will have to do a fair amount of additional work to implement his strategy. In other words, just reading Trend Following will not make you ready to start making trend-based trades, much as simply reading chemistry and physics textbooks won't make you a chemist or a physicist. You will need to determine which markets to trade, your parameters for opening and closing positions, and how much risk you are willing to assume. As such, this book is not for novice investors or for people who are not able to make a deep commitment to developing their own trading methodology.

Nonetheless, Trend Following is a book every serious investor should read. Even if you don't buy everything Covel says, it is always useful to question your assumptions, preconceptions, and past actions. No trading strategy is perfect. At a minimum, Trend Following will help you recognize the flaws and weaknesses in what you're currently doing.

Bottom line: four stars, with the caveat that Trend Following is most appropriate for people who have experience trading and are comfortable moving beyond basic mutual fund and retirement account investing.

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Two books for anybody who wants to learn more about behavioral finance:
Beyond Greed and Fear (Shefrin)
Why Smart People Make Big Money Mistakes And How To Correct Them (Belsky, Gilovich)

And for comparison, three well-known alternatives to trend following:
A Random Walk Down Wall Street (Malkiel): indexing, very passive compared to trend following
Unconventional Success (Swensen): wide diversification across asset classes, but with a buy-and-hold bias not found in trend following
The Only Three Questions That Count (Fisher): top-down forecasting, the antithesis of trend following

I first bought this book three years ago and have since read it probably five times. This is not a book that gives you exact instructions of how to trade, but rather exact pointers for further research and a philosophy to approach trading with. Trend Following enriched me with lots of valuable insights and most certainly opened my eyes to my own weaknesses. I simply cannot understand how anyone who is interested in making money does not rate this book 5 stars.
Thanks Michael!

Read Trend Commandments: Trading for Exceptional Returns. Now this: the textbook of trend following. If you want confidence, read it. If not, don't.