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Trend Following, 5th Edition: How to Make a Fortune in Bull, Bear and Black Swan Markets (Wiley Trading) Hardcover – April 24, 2017
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From the Inside Flap
"When it is a question of money, everyone is of the same religion."
Want to take the financial journey to a new investing philosophy that might very well affect the rest of your moneymaking life? No one can guarantee the yellow brick road, but Michael Covel promises the red pill will leave you wide awake.
Trend Following reveals the truth about a trading strategy that makes money in up, down, and surprise markets. By applying straightforward and repeatable rules, anyone can learn to make money in the marketswhether bull, bear, or black swanby following the trend to the end when it bends. In this timely reboot of his bestselling classic, Michael Covel dives headfirst into trend following strategy to examine the risks, benefits, people, and systems. You'll hear from traders who have made millions, and learn from their successes and mistakesinsights you'll only find here. You'll learn the trend philosophy and how it has performed in booms, bubbles, panics, and crashes. Using incontrovertible data and overwhelming supporting evidence, with a direct connection to the foundations of behavioral finance, Covel takes you inside the core principles of trend following and shows everyone, from brand new trader to professional, how alpha gets pulled from the market.
Covel's newest edition has been revised and extended, with seven brand new interviews and research proof from his one-of-a-kind network. This is trend following for today's generation. If you're looking to go beyond passive index funds and trusting the Fed, this cutting-edge classic holds the keys to a weatherproof portfolio.
- Meet great trend followers and learn their rules and philosophy of the game
- Examine data to see how trend following excels when the you-know-what hits the fan
- Understand trend trading, from behavioral economics to rules-based decision making to its lambasting of the efficient market theory
- Learn trend trading philosophy and do it yourself or invest with a trend following fund
Trend following is not prediction, passive index investing, buy and hope, or any form of fundamental analysis. It utilizes concrete rules, or heuristics, to profit from a behavioral perspective. Trend Following is clear-cut, straightforward, and evidence based. If you're finally ready to profit in the markets, Trend Following is the definitive treatise for a complex world in constant chaos.
From the Back Cover
"Michael Covel's Trend Following: Essential."
—Ed Seykota, profiled in Market Wizards
"Covel's Trend Following is the must-read for all investors. Why? Because every investor needs a trend to make money, and when the trend shifts investors need to follow it. Read it."
—Wesley R. Gray, PhD, CEO, Alpha Architect, and author of Quantitative Momentum
"While enjoying this book, be sure to look up another resource from Covel–his remarkable podcast. Michael has a gift for interviewing, and it is fun and educational to follow him into the offices of many serious traders."
—Dr. Alexander Elder, Author, The New Trading for a Living
"Covel's Trend Following has become an investment classic and a must read for anyone who wants to better understand how to profit from the financial markets using systematic and unbiased approaches."
—Cullen Roche, Founder, Orcam Financial Group, LLC
"Trend following: If it is going up, buy it. If it is going down, sell it. How could something seemingly so simple be so controversial? The answer lies in the definitions: What does going up mean? Going down? What's a trend? What's a turn? These questions have a wide variety of answers, largely dependent on the goals and risk/reward preferences of the answerer. In Trend Following Mr. Covel covers the waterfront. You'll find many definitions of trend following here, each with its advocates. You will be able to compare and contrast approaches and perhaps find one that suits you. At the very least, after reading this book you'll have the territory mapped and understand what trend following has to offer."
—John Bollinger, Founder, www.BollingerBands.com
"While financial television obsessively tracks every tick in the stock market, Michael Covel's Trend Following continues to draw attention to a strategy, diversified trend following, that generates unique returns for disciplined investors with a long-run time horizon."
—Tadas Viskanta, Founder and Editor, Abnormal Returns; Author, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere
Top customer reviews
Two main points of concern. The first is the book's editor failed the author. Mr Covel clearly did lot of research and I feel that every single fact, anecdote and piece of data he uncovered is included. Don't equate length of the book to value. Much of the text is verbatim interviews with the TF gurus. Additionally there are so many quotes that they lose whatever motivational or educational value the author intended. Seriously, it feels like at least one per page. If you're reading on the kindle, it's worse. The quotes are interspersed with the text and only italic font distinguishes the quotes from the narrative. Even the author mentioned this is a recent podcast.
The second point of concern was my biggest disappointment in this highly anticipated book: the book will not teach you how to be a trend follower. Perhaps it's best to explain by describing what I was hoping to see.
Techniques. The author devotes a few pages to describing a system in detail, using moving average crossovers, but does not explain them with the same repetitive, elementary language that he uses to explain why TF is fantastic. The author mentions that traders need a toolkit, but never explains for what should be included in there. He mentions back-testing, but never guides the user how to actually back test a system. Where are the other indicators, their uses, strength/weaknesses?
Charts. Charts. Charts.
I would welcome the inclusion of charts. Charts on stocks or futures identifying when a TF would have entered or exited and the rational. I found a few charts in Chapter 4 showing entry and exit points, but never why a trade was made at that point.
Stories of actual trades: successful ones and why they worked. Failures and what went wrong? Was there a human bias? Did it violate the trader's system? I seriously doubt the author is an TF investor; at least a successful one. It appears to me he makes his living worshiping the TFs and their success not trying to emulate it.
If you're interested, I found High probability trading : take the steps to become a successful trader (Professional Finance & Investment) to be a wonderful book that includes all the items I hoped to find in this book (first-person account, dozens of trade examples, details on several indicators, back-testing guide, suggestions on dealing with the human emotions that can hinder any trading system.).
Instead of being influenced by the media and mutual fund propaganda author Michael Covel cuts through all the pundits opinions about the market and presents how the most successful money mangers and traders really make huge cumulative returns over long periods of time.
How do they trade over many markets and consistently grow capital? They use proven systems that identify and follow trends.They create systems that give them entry and exit signals along with risk management parameters. They are not experts on the fundamentals of any market, but their systems are masters of capturing the price trends in markets. They cut their losses short when they are incorrect but when they are right they let the winning trade run as far as possible.
They also unemotionally exit losses when their stop loss is triggered and they exit winning trades when their exit signal says the trend is coming to an end or reversing. They attempt to capture a big part of a trend, not buying at the low or selling at the high, but waiting for the market to tell them to get in and then when to get out.
Readers want proof that trend following trading works? You will see quantitative data in this book showing the returns of many trend followers. The interviews he shares of many legends are well worth the read. How powerful are these principles? John W. Henry bought the Boston Red Sox with his profits from managing his trend following fund. The book documents records from year after year of successful trading by many trend following funds.
Trend followers do not try to predict the future, they only follow the trend and momentum of the market and get in or out when their system tells them to do so while using careful position sizing and the leverage of futures contracts. Trend Followers go both long and short based on their systems with no bias to bullishness or bearishness. While they may at times have steeper draw downs in the short term they almost always have returns on capital in the long term. They almost always find themselves positioned correctly during big events, bubbles, crashes, and panics because the market was already giving signals through price action with the herd behavior showing fear or greed. This edition expands on how the trend followers made huge returns during October of 2008 because they were already short due to the trend at the beginning of the month. Trend followers made major returns in the financial panic of 2008-2009 while the vast majority of investors lost severely. This book will take you inside the minds of some of the world’s greatest trend traders. I assure you as a trader this could be the best $25 you will ever spend.
Many years ago an earlier edition of this book really helped me solidify my trading systems and plans and understand how to make money from trends alone. I give this book and Michael Covel the most credit for teaching me in advance how to think like a quantitative trader and not an investor during the carnage of the financial panic. Covel’s books saved me from large losses by changing my perspective from predictions and opinions to trend following in my personal accounts.
This new edition adds enough new content that makes another read through well worth it for me. This is the third time reading this book. I am so glad that I received an early review copy of this book. I feel like this edition with it's high quality printing and new content and updates could be the bible of trading. Not just trend following but trading as a whole with all the concepts explored in such great detail. Quite an amazing improvement to the book I already considered in the top 5 trading books every published. I bought and own all of Michael Covel's books and highly recommend them all.