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

by Michael W. Covel (Author) "A market is simply a place where buyers and sellers gather to trade and exchange goods, buying and selling for any number of reasons..." (more)
Key Phrases: great trend followers, other trend followers, underwater equity curve, Bill Dunn, Dunn Capital Management, Wall Street (more...)

Editorial Reviews

Review
A recent interview with Michael Covel on Bloomberg Radio (6.5 MB MP3 audio file) about trend following. "Please read [Trend Following] whether you think you have an interest in trend following or are not quite sure. I guarantee you will be happy that you took the time. It, of course, covers how trend following works, how it's done, and who can do it, and it doesn't beat around the bush with generalities. Again, get this book. Covel has hit a homerun with it."
Gail Osten, Editor-in-Chief
Stocks, Futures & Options Magazine
Official Journal for Personal Investing in Stocks, Futures and Options "A mandatory reference for anyone serious about alternative investments."
Jon Sundt, President and CEO of Altegris "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, CEO, Superfund "A most interesting book -- definitely a 'must have' on your shelf. Pull out the plastic and get it!...Trend Following is well constructed, well written and an excellent distillation of the research undertaken by the author. Backed up by trading 'legends' like Ed Seykota, it convincingly argues that the most successful trading systems are based on trend following...While you may read the book in bed, especially the first time, it is best read at a desk with a notepad handy. While seeming to come from the perspective of technical analysis it is still a very good book on trading psychology...The book is both a great read and an insightful textbook for all traders and investors."
Garnett Znidaric
Your Trading EdgeMagazine/strong>
Australia "Michael Covel's Trend Following: Essential."
Ed Seykota
Trend Follower for 35 years, Incline Village, NV
The Trading Tribe
Ed was originally profiled in The Market Wizards by Jack Schwager "Michael Covel's book is the definitive guide to trend trading. Backed by real world results from some of the biggest and best money managers in the United States, his book will put you on the path to successful trend trading."
Larry Connors
CEO, TradingMarkets.com "Covel has created a very rare thing - a well-documented and thoroughly researched book on trend following that is also well-written and easy to read. It touches on a wide variety of the principles and practices which make for successful trend following. This is one book that traders at all levels will find of real value."
John Mauldin
Millennium Wave Investments, Arlington, TX
Author of Bull's Eye Investing and editor of Thoughts from the Frontline "I think the book did a superb job of covering the philosophy and thinking behind trend following (basically why it works). You might call it the Market Wizards of Trend Following."
Van K. Tharp, Ph.D.
Author of Trade Your Way to Financial Freedom
President, International Institute of Trading Mastery, Inc.
Van was originally profiled in The Market Wizards by Jack Schwager. --This text refers to the Paperback edition.

Review

A recent interview with Michael Covel on Bloomberg Radio (6.5 MB MP3 audio file) about trend following.

"Please read [Trend Following] whether you think you have an interest in trend following or are not quite sure. I guarantee you will be happy that you took the time. It, of course, covers how trend following works, how it's done, and who can do it, and it doesn't beat around the bush with generalities. Again, get this book. Covel has hit a homerun with it."
Gail Osten, Editor-in-Chief
Stocks, Futures & Options Magazine
Official Journal for Personal Investing in Stocks, Futures and Options

 

"A mandatory reference for anyone serious about alternative investments."
Jon Sundt, President and CEO of Altegris

 

"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, CEO, Superfund

 

"A most interesting book -- definitely a 'must have' on your shelf. Pull out the plastic and get it!...Trend Following is well constructed, well written and an excellent distillation of the research undertaken by the author. Backed up by trading 'legends' like Ed Seykota, it convincingly argues that the most successful trading systems are based on trend following...While you may read the book in bed, especially the first time, it is best read at a desk with a notepad handy. While seeming to come from the perspective of technical analysis it is still a very good book on trading psychology...The book is both a great read and an insightful textbook for all traders and investors."
Garnett Znidaric
Your Trading Edge Magazine/strong>
Australia

 

"Michael Covel's Trend Following: Essential."
Ed Seykota
Trend Follower for 35 years, Incline Village, NV
The Trading Tribe
Ed was originally profiled in The Market Wizards by Jack Schwager

 

"Michael Covel's book is the definitive guide to trend trading. Backed by real world results from some of the biggest and best money managers in the United States, his book will put you on the path to successful trend trading."
Larry Connors
CEO, TradingMarkets.com

 

"Covel has created a very rare thing - a well-documented and thoroughly researched book on trend following that is also well-written and easy to read. It touches on a wide variety of the principles and practices which make for successful trend following. This is one book that traders at all levels will find of real value."
John Mauldin
Millennium Wave Investments, Arlington, TX
Author of Bull's Eye Investing and editor of Thoughts from the Frontline

 

"I think the book did a superb job of covering the philosophy and thinking behind trend following (basically why it works). You might call it the Market Wizards of Trend Following."
Van K. Tharp, Ph.D.
Author of Trade Your Way to Financial Freedom
President, International Institute of Trading Mastery, Inc.
Van was originally profiled in The Market Wizards by Jack Schwager.

See all Editorial Reviews

Product Details

• Hardcover: 448 pages
• Publisher: FT Press (November 12, 2005)
• Language: English
• ISBN-10: 0131345508
• ISBN-13: 978-0131345508
• Product Dimensions: 9.3 x 7.1 x 1.8 inches
• Shipping Weight: 2.2 pounds (View shipping rates and policies)
• Average Customer Review: 3.8 out of 5 stars See all reviews (86 customer reviews)
• Amazon.com Sales Rank: #102,720 in Books (See Bestsellers in Books)

  Popular in these categories: (What's this?)

  #35 in	Books > Business & Investing > Investing > Commodities
  #40 in	Books > Business & Investing > Reference > Case Studies

Customer Reviews

Most Helpful Customer Reviews

281 of 297 people found the following review helpful:

5.0 out of 5 stars Hard Cold Reality Makes A Stimulating Read, June 21, 2004

By A Customer

This review is from: Trend Following: How Great Traders Make Millions in Up or Down Markets (Financial Times Prentice Hall Books) (Hardcover)

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.

307 of 326 people found the following review helpful:

5.0 out of 5 stars Tired of the games?, June 30, 2004

By A Customer

This review is from: Trend Following: How Great Traders Make Millions in Up or Down Markets (Financial Times Prentice Hall Books) (Hardcover)

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.

621 of 666 people found the following review helpful:

2.0 out of 5 stars Overrated, June 20, 2004

By	rmr7 "rmr7" (Northeast NJ) - See all my reviews

This review is from: Trend Following: How Great Traders Make Millions in Up or Down Markets (Financial Times Prentice Hall Books) (Hardcover)

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.