Michael Covel talks with Alpesh Patel an asset manager who has written for the Financial Times for many years. Patel and Covel discuss trading in the context of Patel's book, "How To Win at Spread Betting". Even though Patel's book has a focus on spread betting, the style and strategies he talks about hit home with trend following momentum-style trader. Topics include comparisons betweens stocks and futures; what the winners have in common; trade frequency, and why active traders tended to do better in Patel's study; buy & holders vs. spread betters; academic vs. practical insights; whether Patel finds himself at odds with other Financial Times writers; why people like to imagine that trend following and momentum trading doesn't exist; Patel's experience as an expert witness with "trend following on trial"; why the average person has difficulty with betting small, cutting losses, and letting winners ride; George Soros, game theory and trading psychology; win/loss ratios; a coin flipping experiment performed with Ph.D's, the importance of position sizing, and why systems aren't everything; and why gut instinct is the opposite of what professional traders use. Free trend following DVD: trendfollowing.com/win.
Michael Covel talks about conversations he has had in the past 24 hours. Someone posted an equity curve of Bill Dunn against the S&P, and the criticism of the drawdowns began. They never talk about the S&P going down 50% twice in the past 13 years; they never talk about the NASDAQ going down 77%; they never talk about the NIKKEI going down 77%. It's always "trend followers have drawdowns". It's like a broken record. It's a surefire sign if someone starts telling you that they are either trying to push an agenda or they have no idea what they're talking about. Trend following is the meat and potatoes. Don't just trust Covel: look at the data. Next, Covel talks about advising people in their 20s against buying real estate. Many, many areas of real estate in the US that are underwater: are all of these people simpletons, dummies? Or did they get caught up in the greed and the fear of a bubble, and a black swan hit? Covel goes on to talk about black swans, zero interest rate policy, and bubbles (and why there is a way around it all). Next, Covel talks about nurture vs. nature. Of course, when he talks about nurture vs. nature, the Turtle story must be brought up. Covel plays two excerpts: one from NPR's Planet Money and another called "Enroll Yourself In The Genius Factory", which gets at the idea of how people develop talent. Covel discusses the peers of Richard Dennis; emotional intelligence; and trend following in the context of nurture vs. nature. Want a free trend following DVD: trendfollowing.com/win.
Michael Covel talks to author Tom Asacker, author of "The Business of Belief: How the World's Best Marketers, Designers, Salespeople, Coaches, Fundraisers, Educators, Entrepreneurs, and Other Leaders Get Us To Believe." Asacker's book applies to not only all of Covel's world (trading), but it applies to anyone's chosen profession. Asacker and Covel talk about choice and distraction/distrust; belief and its connection to how people make decisions and habit; faith healers and how information can change our beliefs and perceptions; how the supermarket works as a metaphor for belief and choice; Vernon Smith and Daniel Kahneman; the instinctive "feeling" mind vs. the slow, deliberate thinking mind; leading people to choose themselves vs. just getting a job; thinking like a child; comfort vs. desire; why those that have nothing to lose can put themselves in the best position for success; pulling the curtain back on your own mind to determine what your own mind is doing to prevent you from living a full life; the power shift to the individual via the internet; why we see what our minds are conditioned to see; practice, hard work, and passion; the metaphor of baseball, perception, belief, and behavior; thinking your way to a change vs. acting your way to a change; Alan Watts, and the question of "What if money was no object?". Free DVD: www.trendfollowing.com/win.
Michael Covel talks to author, blogger and trader Steve Burns. In his second visit to the podcast Burns and Covel discuss several famed trading quotes containing wisdom from Ed Seykota, Richard Dennis, Tom Willis, Jesse Livermore, Amos Hostetter, Ben Stein, Bertrand Russell, T. Boone Pickens, and Larry Hite. Covel and Burns discuss risk management; position sizing; the magic of compounding; why individual trades have very little meaning; turning down the volume on your emotions in your trades; how your losses can be an education; concept and theory with regard to trend following; quantifying and capturing trends; "just trading the numbers"; greed and fear in the context of trends; the common attitudes and misconceptions of novice to trend following traders; trading against the market vs. trading against yourself; drawdowns, and the importance of studying the track records of the great traders; entry and exit strategies; the importance of starting "right" in every enterprise; the curse of laziness; ignoring the talking heads; why you don't need 20 screens on your desk to trade optimally; cutting your losses; the 1% rule; being blinded by the fundamentals; why if you diversify, control your risk, and go with the trend, it just has to work; I.Q. vs. emotional intelligence (E.Q.); and technology and long term trend following. Special Offer? Receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Are you a gimp? Like that classic scene from Pulp Fiction, the gimp is the average investor. The gimp is the investor that isn't in control, either by their own choice or choices put upon them. They are left to the machinations and maneuvers of forces. They don't think clearly; they don't know how to make a decision. Their decision is simple: sit tight and trust the powers that be. That's what Covel calls "Gimp Investing". If you don't want to be a gimp investor you have to figure out a way to think; a way to be skeptical. Skepticism is where it begins. If you can be a skeptic, then you have a chance. Covel talks about "digging" for information; taking the information that's given to you and sorting it out for truth. Covel moves on to the comparison between digging for information and digging for dinosaurs. This idea of thinking and seeing what the data shows--not just trusting the system and the stories--is exactly what skepticism is all about. Jack Horner, the paleontologist, is one of the greats in his field. He's figured out that dinosaurs built nests, lived in colonies, traveled in herds, and that their skulls changed shape from childhood into adulthood. Most of this was not common knowledge until Horner came around. Horner walked into it wide-eyed; he didn't have a plan. He said, "What can I deduce from this that makes the most sense?" Covel talks about how much this compares to his early experience with looking at the data of trend following traders. Trend following is the other side of the coin to gimp investing. It says if you're willing to take those small losses, you're almost invincible. As long as you can come back to play the next day and you can take those small losses, it puts you in the position where if the black swan comes in, you're prepared. When the gimp style stops working trend following gives you a chance to survive. Covel ends with a clip of Jack Horner. It's useful to hear how an expert goes on to learn. It's not linear learning; if you're trying to make chaos a straight line you're going to have a rough life. Attach Horner's words to good trend following trading and it all connects. Want a free trend following DVD? Go to trendfollowing.com/win.
"Give me a talking head that says which way is up, and I'll listen. Give me something I can believe in." That's what most people believe, even if it's a fantasy. Michael Covel discusses what makes a good teacher, and brings up one quote in particular: "A good teacher is one who will not give you an answer, but will allow you to find the answer in yourself. A teacher is a guide. He or she will show you that the answer is inside you, and that there is a right answer." Michael Covel discusses a John Hussman quote and explores "right" and "wrong" answers. Hussman's comments are not about trading; trend followers don't attempt to make the analysis that he does. Trend followers don't analyze how poor Bernanke's policies may or may not be; trend followers do not attempt to say whether Fed policies are good or bad. You don't make money trying to make those judgments. Covel discusses some of the comments he received after posting the Hussman quote, noting some supportive Fed comments. Of course, none of these views are relevant to trend following trading. But as a human being--as a thinking person--Covel discusses some Fed policies. Covel's point here is to get you to think: Do you just want to trust the system? With stock markets at all-time highs and interest rates low that everything is rosy and everyone has it figured out? With the S&P having collapsed 50% two times in the past fifteen years do you want to trust that it can't happen again? Do you want to trust that the DOW really can't go from 15,000 to 7,500? This is what Hussman is really getting at. Unlike a trend following trader Hussman is getting at why these machinations and maneuvers of the Fed really don't last. The beast can't be contained. So will you have a plan when all hell breaks loose? Nothing can contain market volatility; it always comes back. And sometimes markets don't recover: look at Japan. Covel asks, "do you want to trust the system, or do you want to have control of your life to some degree?" Bottom line, you can make money when the central planning plans break down. Finally, Covel ends today's show with a long clip from Hugh Hendry that gets at the issue of what capitalism is today. Do you want a free trend following DVD? Go to trendfollowing.com/win.
Wherever you go, gambling and the lottery is how most people think about making money. It is one of the biggest scams put upon the average guy. Most of it is run by the government, too. As Abba so eloquently put in their song "Money Money Money", that's what people dream about. But even when people open up and want to learn something new they often come to Michael Covel asking for the secrets. Covel's answers? There are no secrets; there is only knowledge that you do not yet possess. On today's show Covel launches into a clip from CNBC. Do trend following traders care what Bernanke thinks? Covel talks about propaganda; storylines in the news and whether these "arguments" are as real as they seem; and how real traders go with the flow. Ultimately it's about science; the science of what the market is doing. Covel reads a blog excerpt from Sean Carroll, and goes over a three-part definition of what makes up science to further comment on the CNBC clip. Covel just wants to make the point: you have to look through the haze to find out what's really going on. You have to break it down to science. The most successful trend following trader alive today, David Harding, is a scientist. Going through the whole process of thinking about trend following from a scientific perspective, Covel is showing you the light. Free DVD: trendfollowing.com/win.
Michael Covel just released the first chapter and preface for the audiobook version of The Complete TurtleTrader in a recent podcast. When Covel heard that a Chicago reporter did a retrospective piece on the Turtles for WBEZ in Chicago, he decided to include the piece along with the afterword for the audiobook in today's podcast. The afterword wasn't in the first edition of the original book release due to some of the more "fun" details it included (was added in paperback release). There are some fantastic Turtle traders; many people who did really well. However, for some, it was weird to say the least. That doesn't mean you can't learn from them, and the TurtleTrader book afterword is a wealth of information and insight for anyone with even a passing interest in the Turtles. Do you want a free trend following DVD? Go to trendfollowing.com/win.
Today on the show Michael Covel interviews author Brendan Moynihan. Moynihan's co-authored book, "What I Learned Losing a Million Dollars" is a profile of trader Jim Paul along with Moynihan's ideas and thoughts on behavioral finance, risk management, and loss-taking strategies that all great traders act upon. Although released almost twenty years ago Moynihan's book contains timeless wisdom and principles that pertain to any number of issues surrounding us today. Covel and Moynihan talk about how Moynihan's background, the background of his subject, Jim Paul, and how the two came together in "What I Learned Losing a Million Dollars"; the psychology of loss and what we can learn from losing; the idea that you "just have to make the money" and why that can be a bad place to start as a motivator; personalizing loss; Paul's interactions with Rich Dennis; studying the contradictions of great traders, and how loss is the only topic they agree on; controlling how much you can lose; staying the course and the importance of not changing your strategy mid-stream; profit motive vs. prophet motive; the difference between investors, traders, speculators, bettors, and gamblers; the slippery slope of always wanting to be "right"; the five stages of internal loss; the danger of personalizing your success; the difference between discrete events vs. continuous events; the "uncle" point; why it's important to go broke at least once in your life; and the difference between emotions and emotionalism. Receive free DVD: trendfollowing.com/win.