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

by Covel, Michael W.

• ISBN13: 9780137020188
• ISBN10: 013702018X
• Edition: 1st
• Format: Paperback
• Copyright: 2009-02-15
• Publisher: Ft Pr

Summary

Today, you need trend following more than ever. Read this bestselling book, and put it to work for you! Real proof, real data, real results Includes over a decade of detailed performance charts, updated to include the Fall 2008 market crash All the Information You Need...in One Number Why the market price still tells you all you need to know to trade--and always will--in both bull and bear markets Pinpointing Targets of Opportunity What to trade, when to trade, and how much to trade Meet Today's Leading Trend Followers Extraordinary trader profiles, from David Harding to John W. Henry to Ed Seykota Foreword by Larry Hite xiii Preface xvii Part I 1 Trend Following 3 2 Great Trend Followers 27 Part II 3 Performance Data 97 4 Big Events, Crashes, and Panics 123 5 Baseball: Thinking Outside the Batter's Box 181 Part III 6 Human Behavior 193 7 Decision Making 211 8 Science of Trading 221 9 Holy Grails 231 Part IV 10 Trading Systems 247 11 The Game 277 Afterword 285 Foreword to the First Edition by Charles Faulkner 299 Appendices Introduction to Appendices 305 A Trend Following for Stocks 307 B Performance Guide 347 C Short-Term Trading 375 D Personality Traits of Successful Traders 377 E Trend Following Models 381 F Trading System Example from Mechanica 385 G Critical Questions for Trading Systems 395 Resources 397 Endnotes 399 Bibliography &nb

Author Biography

Michael Covel is a highly respected author, director, and entrepreneur who founded the internationally known website TurtleTrader.com in 1996. Covel’s first book was Trend Following: How Great Traders Make Millions in Up or Down Markets (FT Press). The book profiles great trend following traders who have won billions in the market and has been translated into 10 languages so far.

 

Covel’s second book The Complete TurtleTrader: The Legend, the Lessons, the Results is the definitive inside look at the legendary trader Richard Dennis and his student traders, ‘The Turtles.’ The book has received wide acclaim from the Turtles themselves. Translated into 6 languages so far.

 

Covel also wrote, directed, and produced a theatrical release documentary titled Broke: The New American Dream, built around the subject of behavioral finance, specifically investigating the 2007—2009 market crisis and crash.

 

Michael Covel can be reached directly at www.michaelcovel.com

Table of Contents

Foreword	p. xiii
Preface	p. xvii
Acknowledgments	p. xxi
	p. 1
Trend Following	p. 3
The Market	p. 3
Winning Versus Losing	p. 4
Investor Versus Trader	p. 6
Fundamental Versus Technical	p. 7
Discretionary Versus Mechanical	p. 11
In Plain Sight	p. 12
Change	p. 15
Modus Operandi: Price	p. 17
Follow the Trend	p. 18
Loss	p. 22
Conclusion	p. 23
Great Trend Followers	p. 27
David Harding	p. 29
Bill Dunn	p. 32
John W. Henry	p. 45
Ed Seykota	p. 58
Keith Campbell	p. 67
Jerry Parker	p. 71
Salem Abraham	p. 74
Richard Dennis	p. 78
Richard Donchian	p. 85
Jesse Livermore and Dickson Watts	p. 90
	p. 95
Performance Data	p. 97
Absolute Returns	p. 98
Fear of Volatility and Confusion with Risk	p. 99
Drawdowns	p. 106
Correlation	p. 111
Zero Sum Nature of the Markets	p. 114
George Soros and Zero Sum	p. 116
Big Events, Crashes, and Panics	p. 123
2008 Stock Market Bubble and Crash	p. 126
Day-by-Day Analysis	p. 136
2000-2002 Stock Market Bubble	p. 138
Long-Term Capital Management Collapse	p. 151
Asian Contagion	p. 164
Barings Bank	p. 168
Metallgesellschaft	p. 172
Final Thoughts	p. 175
The Always "New" Coming Storm	p. 178
Baseball: Thinking Outside the Batter's Box	p. 181
The Home Run	p. 182
Moneyball and Billy Beane	p. 185
John W. Henry Enters the Game	p. 186
Red Sox 2003-2007	p. 188
	p. 191
Human Behavior	p. 193
Prospect Theory	p. 194
Emotional Intelligence: Daniel Goleman	p. 200
Charles Faulkner	p. 201
Ed Seykota's Trading Tribe	p. 202
Curiosity Is the Answer, Not Degrees	p. 204
Commitment to Habitual Success	p. 206
Decision Making	p. 211
Occam's Razor	p. 212
Fast and Frugal Decision Making	p. 213
The Innovator's Dilemma	p. 216
Process Versus Outcome	p. 218
Science of Trading	p. 221
Critical Thinking	p. 222
Chaos Theory: Linear Versus Nonlinear	p. 224
Compounding	p. 229
Holy Grails	p. 231
Buy and Hold	p. 232
Warren Buffett	p. 234
Losers Average Losers	p. 235
Crash and Panic	p. 238
Analysis Paralysis	p. 241
Final Thoughts	p. 243
	p. 245
Trading Systems	p. 247
Risk, Reward, and Uncertainty	p. 248
Five Questions for a Trading System	p. 253
Your Trading System	p. 265
Frequently Asked Questions	p. 266
The Game	p. 277
Slow Acceptance	p. 278
Blame Game	p. 279
Understand the Game	p. 280
Decrease Leverage; Decrease Return	p. 281
Fortune Favors the Bold	p. 282
Afterword	p. 285
Acceptance	p. 285
Inefficient Markets	p. 288
Trend Following Critics	p. 290
Critic Geetesh Bhardwaj	p. 294
Final Thoughts	p. 296
Foreword to the First Edition by Charles Faulkner	p. 299
Appendices	p. 303
Introduction to Appendices	p. 305
Trend Following for Stocks	p. 307
Does Trend Following Work on Stocks?	p. 307
Short Selling	p. 318
Tax Efficiency	p. 318
The Capitalism Distribution: Observations of Individual Common Stock Returns, 1983-2006	p. 331
Charts	p. 338
Performance Guide	p. 347
Trend Following Historical Performance Data	p. 347
Abraham Trading Company	p. 347
Campbell & Company, Inc.-Financial Metals & Energy- Large Program	p. 349
Chesapeake Capital Corporation-Diversified Program	p. 352
Clarke Capital Management, Inc.-Millennium Program	p. 354
Drury Capital, Inc.-Diversified Trend Following Program	p. 355
DUNN Capital Management, Inc.-World Monetary Assets	p. 356
Eckhardt Trading Company-Standard Program	p. 359
John W. Henry & Company, Inc.-Financials and Metals Program	p. 361
Millburn Ridgefield Corporation-Diversified Program	p. 363
Rabar Market Research, Inc.-Diversified	p. 366
Sunrise Capital Partners LLC-Expanded Diversified	p. 368
Superfund	p. 370
Transtrend B.V.-Diversified Trend Program-Enhanced Risk (USD)	p. 371
Winton Capital Management Ltd-Diversified Winton Futures Fund	p. 372
Risk Disclaimer	p. 374
Short-Term Trading	p. 375
Personality Traits of Successful Traders	p. 377
Trend Following Models	p. 381
Trading System Example from Mechanica	p. 385
System Background Information	p. 385
System Details	p. 386
A Canadian Dollar Trade	p. 388
System Performance	p. 389
Summary	p. 392
Critical Questions for Trading Systems	p. 395
Resources	p. 397
Endnotes	p. 399
Bibliography	p. 423
Index	p. 431
Table of Contents provided by Ingram. All Rights Reserved.

Excerpts

Praise for Trend Following Praise for Trend Following"Michael Covel's Trend Following: essential." Ed Seykota, trend follower and original market wizard"Trend Following by Michael Covel? I'm 'long' this book." Bob Spear, developer of Trading Recipes Software"Michael Covel's Trend Following is a breakthrough book that captures the essence of what really makes markets tick. Diligently researched and comprehensive in scope, it will replace The Market Wizards as the must-read bible for a new generation of traders." Jonathan Hoenig, portfolio manager, Capitalistpig Hedge Fund LLC and Fox News contributor"Investment books that have a lasting appeal offer insight that resonates with a large number of investors. We believe Michael Covel's Trend Following will be such a book." Richard E. Cripps, Legg Mason chief market strategist"Please read Trend Following whether you think you have an interest in trend following or are not sure...Covel has hit a home run with it." Gail Osten, editor-in-chief, Stocks, Futures, & Options magazine"Michael Covel has written the definitive book on trend following. With careful research and clear insight, he has captured the essence of the most successful of all trading strategies. Michael knows his subject matter and he writes about it with passion, conviction, and enthusiasm. This enjoyable and well written book is destined to become a classic." Charles LeBeau, author of Technical Traders Guide to Computer Analysis of the Futures Markets"Trend Following is an engrossing and educational journey through the principles, pitfalls, players, and psychology of aggressive technical trading of the investment markets. It is rich in its wisdom and historical study." Gerald Appel, president of Signalert Corporation and publisher of Systems and Forecasts newsletter"Conventional wisdom says buy low and sell high, but what do you do now that your favorite marketbe it a stock, bond, or commodityis at an all-time high or low? For a completely different perspective, from people who actually make money at this business, take a look inside. Michael Covel has written a timely and entertaining account of trend followinghow it works, how to do it, and who can do it. While it's not for everybody, it might be for you." Charles Faulkner, NLP modeler and trading coach, featured in numerous books including The New Market Wizards"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., president, International Institute of Trading Mastery, Inc. Van was originally profiled in The Market Wizards by Jack Schwa