Article Trend Following: An Interview With Michael Covel

T2W Bot

Staff member
1,454 54
The following is an interview of Michael Covel by Trade2Win Content Editor John Forman.  Michael is the author of the highly regarded book Trend Following, which makes a very strong case for the value of trend trading methods.
At the very beginning of your book you differentiate between traders and investors. Why is trading better than investing?
Thinking like a trader is the only way to profit in today?s markets.
Investors buy and hold. Hoping that the market will continually move up, they buy long with no exit plan. They do not manage risk so they give up control. Traders, on the other hand, do not care whether the market goes up or down. They buy long or sell short and they always have an exit plan. They have predefined exit points meaning they know when to exit for profit and when to exit to minimize loss. Traders practice risk management. They define risk. They know with mathematical certainty exactly how much they are willing to lose. They take control.
Because the...
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trendie

Legendary member
6,232 1,007
Quite a good article.
Would have been improved if there was an example of how a trader defines a trend, and how it would fare on the Dow over the past two years as an example. ( the article asks the question how to ID a trend, but then fails to answer it. )
The issue is made more complex when trying to answer "how much" to buy.
The book by the Michael Covel is also quite informative.
 

fxmarkets

Established member
834 50
He seems like a grounded chap, I see the point he makes about buy and hold types, dodgy ground indeed, perhaps why the term "Pound cost Averaging" was brought forward to justify holding and buying more of wrong positions, because fundamentally they are solid value therefore we buy more, yes indeedy. I am correct.
 

chump

Senior member
2,212 274
I didn't like it very much for the same reason I don't like most books on trading ...general inability to clearly define terminology ..same inability leads to general confusion / misunderstanding over what is actually meant . I'll accept that a few pages as per this article is hardly room to get specific about statements made ,but that being the case it might be better to write nothing (although that wouldn't keep the cash register tinging over ...cynical ? or realistic ? )
 

Tuffty

Well-known member
442 8
"What trend following is not is prediction or forecasting about how the markets will go"

Oh yes it it. A trend follower will believe the market will go in trends to be followed!!
 

Rhody Trader

Senior member
2,620 264
Tuffty said:
"What trend following is not is prediction or forecasting about how the markets will go"

Oh yes it it. A trend follower will believe the market will go in trends to be followed!!
Right. A trend follower believes that a trend, once established, will tend to persist.

The trend follower, however, does not attempt to determine in advance when or in what direction a trend will develop, nor does he/she try to determine a price target. The whole idea is to take what the market gives you - identify a trend, get on board, ride it for as long as it lasts, get off when it's done, look for another one.
 

SOCRATES

Veteren member
4,966 134
chump said:
I didn't like it very much for the same reason I don't like most books on trading ...general inability to clearly define terminology ..same inability leads to general confusion / misunderstanding over what is actually meant . I'll accept that a few pages as per this article is hardly room to get specific about statements made ,but that being the case it might be better to write nothing (although that wouldn't keep the cash register tinging over ...cynical ? or realistic ? )
Yes, quite.....Chumpy, you've pinned it again.
 

Tomerep

Member
72 1
Nice guy, but I wouldnt buy his book.. too many books about trading, and I guess his book isn't anew anything.
 

nine

Senior member
2,038 506
If you're going to read about trading get a book by:
- someone who really traded (look at this guys history); or
- someone whos worked with lots of traders on their psych issues; or
- someone really smart who has some great ideas.

Funny how plausible some people can be. They sell web sites; sell books; sell overpriced undersupported courses; sell themselves --- as one rock singer said, when you can fake sincerity you've really got it made.

On the other hand - the world does need more trend followers.

Cheers :)
 

nine

Senior member
2,038 506
I forgot to mention the strange coincidence that negative reviews of MC's book on Amazon were removed from Amazon --- lots of them, and quickly. I no longer use Amazon reviews as a quality measure although I suspect that few authors are like that.

Not wishing to be a neggy here I will suggest some things worth reading:

- a really intellectually stimulating book about trading: Fooled by Randomness, Nassim Taleb
- a book by a student of trader psychology: The Disciplined Trader, Mark Douglas
- a book of good ideas (including real trend following ideas): The Ultimate Trading Guide, John Hill
- inspirational books about traders: The Market Wizard series.

Good Luck to all you real traders out there.
May you succeed and may the scum that prey on you rot in hell :)
 

SOCRATES

Veteren member
4,966 134
Kiwi said:
If you're going to read about trading get a book by:
- someone who really traded (look at this guys history); or
- someone whos worked with lots of traders on their psych issues; or
- someone really smart who has some great ideas.

Funny how plausible some people can be. They sell web sites; sell books; sell overpriced undersupported courses; sell themselves --- as one rock singer said, when you can fake sincerity you've really got it made.

On the other hand - the world does need more trend followers.

Cheers :)
Yes, Kiwi. I would add the following:~

- Someone whom you have sat beside and seen what he can do.
-Someone who has worked with traders, not UNSUCCESSFUL traders but CONSISTENTLY SUCCESSFUL ones.
-Someone who not only has great ideas but it can be proved that they are the RIGHT IDEAS, and additionally who is willing to pass them on and explain them properly in a way the recipient can accept and understand and ultimately REPLICATE..
 

pony_x

Newbie
3 0
I have read the book. It consentrates more on abstract things. If my memmory serves me right , the book had only one example of a trend following system at the very end of the book.Book worth reading though.
 

rizcenzo

Newbie
0 0
I am not yet a convert to trend following but I respect the discipline required for trading this method. A lot of the messages in the piece above apply to trading in general and while they may be nothing 'new', sometimes old lessons need to be re-learned. I quite like Covel's web-site for the wealth of articles and links.
 

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