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Trend Following with Michael Covel

Bestselling author Michael Covel is the host of Trend Following Radio with 5 million listens. Investments, economics, decision-making, human behavior & entrepreneurship--all passionately explored. Guests include Nobel Prize winners Robert Aumann, Angus Deaton, Daniel Kahneman, Harry Markowitz & Vernon Smith. Also: James Altucher, Dan Ariely, Jean-Philippe Bouchaud, Kathleen Eisenhardt, Marc Faber, Tim Ferriss, Jason Fried, Gerd Gigerenzer, Larry Hite, Sally Hogshead, Ryan Holiday, Jack Horner, Ewan Kirk, Steven Kotler, Michael Mauboussin, Tucker Max, Barry Ritholtz, Jim Rogers, Jack Schwager, Ed Seykota, Philip Tetlock & Walter Williams. All 500+ eps at www.trendfollowingradio.com/rss.
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Now displaying: Category: trend following

Bestselling author Michael Covel is the host of Trend Following Radio with 5 million listens. Investments, economics, decision-making, human behavior & entrepreneurship--all passionately explored. Guests include Nobel Prize winners Robert Aumann, Angus Deaton, Daniel Kahneman, Harry Markowitz & Vernon Smith. Also: James Altucher, Dan Ariely, Jean-Philippe Bouchaud, Kathleen Eisenhardt, Marc Faber, Tim Ferriss, Jason Fried, Gerd Gigerenzer, Larry Hite, Sally Hogshead, Ryan Holiday, Jack Horner, Ewan Kirk, Steven Kotler, Michael Mauboussin, Tucker Max, Barry Ritholtz, Jim Rogers, Jack Schwager, Ed Seykota, Philip Tetlock & Walter Williams. All 500+ eps at www.trendfollowingradio.com/rss.

Aug 18, 2017

Collin Seow is author of “The Systematic Trader: How I turned a $250,000 debt into profits through stock trading.” He also is a qualified Chartered Portfolio Manager with a Certified Financial Technician qualification, and a member of MENSA Singapore and Technical Analysts Society Singapore.

Michael and Collin switch discuss the “Singaporean perspective.” What is the Singaporean perspective and what helped lay the foundation for their success? The founding fathers of Singapore set forth strict rules and regulations so people knew what they could and could not do. The system was laid out clear and concise. Citizens knew what their boundaries were down to the last detail. For example, there are rules defined ranging from whether or not you can chew gum to how for trees are allowed to be planted apart from one another.

Collin moves from the Singaporean perspective socially, to their perspective on trading. More traders in Asia seem to be open to the idea of systematic trading. When he back tests a system, he doesn’t just look at making money, he tries to figure out how to filter out the losses. He wants to protect what he has so the returns will take care of themselves. Picking a certain percent that you’re willing to risk on a trade is not necessarily intuitive. Collin also looks at both position trading and swing trading, and adjusts his risk according to trading style. Although there are many different styles, and factors that play into how one will trade, Collin still attributes over 50% of trading success to having the right psychology.

In this episode of Trend Following Radio:

  • Different types of momentum trading
  • Singaporean perspective
  • Risk management
  • Position trading vs. swing trading
  • A sense of entitlement in today’s society
Aug 4, 2017

Art Collins is author of “Beating the Financial Futures Market: Combining Small Biases Into Powerful Money Making Strategies”, “When Supertraders Meet Kryptonite”, “Market Rap: The Odyssey of a Still-Struggling Commodity Trader” and “Market Beaters.” He has been trading systematically for the past 30 years.

How was Art Collins able to get Richard Dennis, Bill Dunn, Bob Pardo, Mike Dever and Larry Williams (to name a few) to talk? He made the interviews more like a partnership, than an interview. He made an impressive name for himself which led to positive word of mouth spreading.

What does robustness mean to Art? He uses four rules for prudent testing: 1. Don’t settle on your best result if it is a “diamond in the rough”. 2. Strategies should test well in various markets, particularly similar ones. 3. You don’t want your results to be bunched up in limited time frames. 4. Stay focused on testing concepts you understand in the markets.

Throughout the years Art wasn’t only focused on trading markets. He also studied how to beat the blackjack table and how to skew the odds in his favor when betting on sports. Trading football lines, and trading the price of stocks – what’s the difference? There isn’t much of a difference when you take a technical and systematic approach to them. It’s about keeping emotions out of it. He never wanted to be a cowboy trader or thought of as a “genius”, he just wanted his systems to work. Michael and Art spend the rest of this episode diving into card counting, mechanical systems, gambling on football, data mining and the fools errand of making $1,000 a day.

In this episode of Trend Following Radio:

  • Systems trading
  • Richard Dennis
  • Card counting
  • Mechanical systems
  • Robustness
  • Data mining
Jul 31, 2017

Michael reads an article he recently wrote for The Observer. He weaves in commentary throughout and speaks to the gross misuse of political power. Michael portrays politicians and the D.C. culture as a dog and pony show.

In this episode of Trend Following Radio:

  • Parliament of Whores
  • Bill Clinton presidency
  • Political dog and pony show
  • 2000 stock crash
Jul 24, 2017

Gimme Danger with Michael Covel on Trend Following Radio. A new monologue for the week.

Jul 10, 2017

An impassioned intro and an oldie but goodie monologue. Enjoy!

Jun 12, 2017

Paul Singer is described as one of the smartest money managers. He has a 2.2B net worth. His perspective on trading mirrors trend following even though he is not a stated trend trader. Listen and learn.

In this episode of Trend Following Radio:

  • Doom and gloomers
  • Macro economic perspective
  • Trump’s impact on the markets
  • Timing markets
  • The moment of right now
May 29, 2017

Michael Covel and Larry Tentarelli break open the newest edition of Trend Following and discuss details of the 5th edition. It becomes a challenge to continually “up the ante” and Larry confirms that Michael hit the mark on this edition. The book is double the size and broken down into three sections: Principles, interviews, and research. Michael and Larry discuss: Dunn vs. S&P, mechanical trading, fundamentals, Warren Buffett and his drawdowns, 200 day moving averages, Nate Silver and Harry Denton on prediction, large fund trading vs. small fund trading, John W. Henry, chasing tops and bottoms of the market, Paul Tudor Jones, price action, process and outcome, CNBC and Joe Kernen, and much more.

In this episode of Trend Following Radio:

  • Is trend following dead?
  • Warren Buffett
  • Catching the bottom of the market
  • Prediction as a business
  • Price action
  • Process vs. Outcome
  • CNBC
  • Fundamentals
May 8, 2017

Today is another mega eclectic episode featuring Douglas Emlen, Toby Crabel, Robert Aumann, Ryan Holiday, Sally Hogshead and Michael Mauboussin.

Douglas Emlen is a professor at the University of Montana. He is the recipient of the Presidential Early Career Award in Science and Engineering from the Office of Science and Technology Policy at the White House. He has also earned multiple research awards from the National Science Foundation, including their five-year CAREER award.

Toby Crabel is founder of Crabel Capital Management. His approach is very different from Covel’s, but there are some commonalities: price action driven, systems, models, risk management. Crabel works on a whole different timeframe than the typical trend follower, typically turning his portfolio over in less than a day. Crabel, a former pro tennis player, has a philosophical nature and discusses how he executes these philosophies in the trading world.

Robert Aumann is an Israeli-American mathematician and a member of the United States National Academy of Sciences. He is a professor at the Center for the Study of Rationality in the Hebrew University of Jerusalem in Israel. Aumann is the 4th Nobel Prize Laureate in economics to be a guest on the podcast.

Ryan Holiday is an American author, writer, and marketer. He is the media strategist behind authors Tucker Max and Robert Greene, the former Director of Marketing for American Apparel and an editor-at-large for the New York Observer.

Sally Hogshead is an American speaker, author, former advertising executive, as well as the Chief Executive Officer of Fascinate, Inc. Hogshead’s newest book is “How The World Sees You: Discover Your Highest Value Through The Science of Fascination.”

Michael Mauboussin is an author, investment strategist in the financial services industry, professor at the Columbia Graduate School of Business, and serves on the board of trustees at the Sante Fe Institute (an independent, nonprofit theoretical research institute). He is managing director and head of Global Financial Strategies at Credit Suisse, where he advises clients on valuation and portfolio positioning, capital markets theory, competitive strategy analysis, and decision making.

In this episode of Trend Following Radio:

  • Humans and animals
  • International hacking
  • Game theory
  • Economics
  • World champions of peace
  • The book writing process
  • Flow state
  • Personal branding
  • Multi-disciplinary thinking
  • Luck vs. Skill
  • Outcome bias
May 1, 2017

Michael reads, “Sparks Fly on Wall Street Over Tesla’s Current Valuation: The electric carmaker overtook GM in market capitalization last week. Is this just a bubble – or is battery tech the future?” Michael uses the piece to drive home the point that nobody knows why one stocks price is high or low. All that matters is the price. There is no way to know all of the fundamentals. Bottom line, Tesla stands around $300 a share. It is a waste of time to try and figure out why. Make sure you have your stops in place and enjoy the ride.

In this episode of Trend Following Radio:

  • Tesla stock price
  • Seeing the world through a different lens
  • Fake News
  • Trading off price alone
Apr 24, 2017

The new edition of Trend Following has gone from 100,000 words to 230,000. It is out now and it is the definitive effort on trend following. Other books have been written and they have given some good insights. However, this new edition is it. Today, Michael reads passages from the Preface and Chapter 1 of the 5th edition of Trend Following. This sneak peak gives listeners a flavor of how Michael is pushing the envelope in today’s world and further enhancing an understanding of trend following.

In this episode of Trend Following Radio:

  • 5th edition of Trend Following Preface
  • 5th edition of Trend Following Chapter 1
Oct 5, 2015

Today on Trend Following Radio, Michael Covel takes time out to highlight the fact that trend following isn’t simply about trading. From gamblers to pharmaceutical executives to those in the film and music industries, trend following is a strategy rooted in human nature itself.

As an example, Michael examines the success of film producer Jason Blum. In direct opposition to the Hollywood mantra of Spend! Spend! Spend!, Blum has chosen another path. Blum, recognizing that big budgets don’t necessarily mean big profits, developed a filmmaking system based on low budget projects. Blum fully understands that close to half of his films will flop. But he also understands that a handful of box office successes will more than cover those losses. This is the essence of trend following.

Michael goes on to quote from a 2005 article by best-selling author Michael Crichton. Crichton, talking about the then-burgeoning field of futurism, explains that these so-called futurists don’t actually know any more about the future than the average man on the street. These “experts” are guilty of the same flawed thinking that spews forth from the minds of traders who think they know what the market will do tomorrow.

In this episode of Trend Following Radio:

  • Why embracing uncertainty pays big
  • Trend following: it’s human nature
  • Losses: acceptable when you strategize to cover them
  • The sunk cost fallacy
  • Opening your mind to alternative ways of thinking
  • The mistake of blindly accepting the word of “authorities”

Want a FREE Trend Follwing DVD? Find it here.   

Sep 21, 2015

On today’s show Michael Covel examines the duplicitous nature of the mainstream financial media, how its talking heads insist on pretending they can predict the future, and how even its most respected publications promote seemingly opposing ideas.

To emphasize his point, Michael opens the discussion by talking about the publication process for his first book, Trend Following. After being passed on by one publisher, he was eventually signed by the publishing side of the Financial Times conglomerate. The same FT, as Michael points out, that’s been trashing trend following for decades.

And nothing has changed. Michael reads from a September 2015 FT article in which author Stephen Foley gives trend following the traditional mainstream bashing we’ve come to except. But in the same issue, FT conducts an interview with Nobel Prize-winning economist Robert Shiller, in which Shiller says, he sees a massive stock market bubble – the kind of thing trend following has repeatedly proven to be best-equipped to handle.

In this episode of Trend Following Radio:

  • Trend following: a system, not a theory
  • Opinions are worthless without strategy
  • The mainstream media’s continued attacks on trend following
  • No one knows the future – embrace the idea
  • Theories are conjecture
  • Focus on the now – that’s the indicator

Want a FREE Trend Follwing DVD? Find it here

Sep 14, 2015

On today’s show, Michael Covel talks about how people that are ahead of the curve often find themselves isolated – even ridiculed – by those who don’t yet get it. This, as Michael points out, is certainly true for trend following traders, and some of the sharpest push back comes from the talking heads of the media.

To emphasize his point, Michael plays clips from an interview between CNBC’s Joe Kernen and Graham Capital’s Ken Tropin, a highly successful trader who heavily incorporates trend following techniques into his overall strategy. To Michael, of utmost significance in the two men’s exchange, is the fact that Kernen bumbles through the interview wholly unprepared (either via incompetence or on purpose). Kernen didn’t respect Tropin or his strategy enough to do even the most basic homework beforehand.

Michael’s discussion then moves on to the topic of uncertainty. In direct opposition to media personalities, that are paid to pretend to know what the market will do, trend following traders embrace the knowledge that they can’t predict the future. Uncertainty makes the game more exciting, and not just the investment game. As Michael demonstrates, the principles of trend following can be effectively applied across myriad disciplines.

In this episode of Trend Following Radio:

 

  • Recognizing that without a strategy, you’re at the mercy of the machine
  • Embracing uncertainty
  • Understanding that knowing every market move won’t help without a plan
  • The importance of setting your strategy beforehand
  • Seeing that media personalities are paid to pretend to know all
  • How the principles of trend following apply to other disciplines

Want a FREE Trend Follwing DVD? Find it here

Aug 31, 2015

Human beings have a strange habit of trusting other humans, even when the trust isn’t warranted. Everywhere in mainstream media, statistics are used and misused to convey an agenda. All too often, people ignore the agenda and buy into this engineered information.

To be successful, both in life and in trading, a person must move beyond this behavior. You need to be a skeptic. You can’t put blind faith into a system that doesn’t make its agenda clear. You probably shouldn’t trust it even if the agenda does seem clear. This is just as true when considering pollsters like Frank Luntz as it is when listening to the sales pitches of discretionary traders on Wall Street.

In today’s episode Michael Covel discusses the biases we have as human beings that lead us to poor investing decisions. Most notably, it is a bias that prevents us from trusting algorithmic trading, even when a human alternative is demonstrably worse. Through entertaining and insightful clips, Michael demonstrates why algorithms deserve our trust: their accountability and their ability to be back tested through different market conditions.

The episode is full of interesting sound clips and passages from bright minds such as Penn Jillette, Leda Braga, Daniel Dennett, Lasse Pedersen, and David Harding.

In this episode of Trend Following Radio:

  • The use and misuse of statistics
  • Using skepticism to your advantage
  • The advantages of algorithmic trading
  • Leda Braga on why ‘Black Box’ isn’t a fair term
  • Daniel Dennett’s simplifications of algorithms and computing
  • Trend following as simple agnostic rules that can easily be passed to a computer
  • Efficient market theory failure during surprises

Get a free Trend Following DVD here.

Aug 28, 2015

Today’s guest is Mark Sleeman of MS Capital Management. Mark is a self-taught trend following trader who’s been trading since the late 80s.

Michael Covel asks Mark about the road that led him to trend following and his early experiences as an trader. Mark talks about how, in the beginning, he was only looking for a way to make money. But with his engineering background, when he happened upon systems trading, everything fell into place. So confident was Mark in both his system and his own abilities, in fact, that he was willing to sell his house to get started (to raise trading capital).

Mark points out that investing based on “bottoms and tops” alone is pointless since no one can predict where the market will turn. The key to smart investing is a diversified portfolio that can sustain small losses long enough to catch those big wins. Trend following is the only proven system with decades of empirical data to back it up, and it’s the only way to trade if you want to become a long term survivor.

Other areas of discussion include the psychology of trading, understanding that patience doesn’t come naturally (has to be learned), and the importance of maintaining a life outside the markets.

In this episode of Trend Following Radio:

  • The fallacy of “buy low, sell high”
  • The psychology of trading
  • Keeping your losses small
  • The importance of maintaining a life
  • Focusing on the strategy, not the instrument
  • Understanding that patience has to be learned

Want a FREE Trend Following DVD? Get it here

Aug 17, 2015

Many that aspire to be successful investors or traders look up to Warren Buffett as a role model. Yet the chances of anyone amassing that wealth by following the same path as Buffett are extremely unlikely. Debating survivorship bias seems perfectly appropriate, but that's never broached.

On the other hand, becoming the next Bill Dunn or Ed Seykota (or fill in the blank with the name of any trend follower) has much more possibility. In the trend following world there are many more successful traders, successful examples, which is much more motivational and inspiring.

In this episode, Michael Covel curates excerpts from Kevin Bruce, Jim Simons, and David Harding. All three talking about systems and or trend following. The important point about systems is not just selecting the right one, but also sticking to it once selected. Often people are tempted to make discretionary calls and override a system, defeating its original purpose. Instead, the potential rewards and risks inherent in a trend following system should be evaluated at the beginning, discretionary calls made at the outset, then let the system run without interference. That is the path to potential success.

In this episode of Trend Following Radio:

  • The importance of practice and persistence in trading
  • Finding trends mathematically
  • The importance of not overriding systems
  • Being prepared for drawdowns
  • Looking at the S&P 500 as a trading system
  • Dispelling the myths of the mainstream financial world

Get a FREE Trend Following DVD here.

Aug 14, 2015

Today’s guest is Alexander Ineichen founder of Ineichen Research and Management. He is the author of several books including “Absolute Returns” and “Asymmetric Returns”. Inehichen has been researching and writing about trend trading strategy for decades.

The conversation today focuses on the notion of simplicity as sophistication. Michael Covel and Alexander Ineichen discuss the habit of investors to get caught up in market forecasting fantasies. Often, as research shows, people are drawn toward the excitement of what they perceive as the financial industry dream. They get distracted by what could be the future when they should be directing their attention at what’s happening in the moment. This is also what trend following is all about.

Ineichen explains his particular method of nowcasting, which involves combining hard market trends with socio-economic data from other fields. The end goal is to create a far more robust and stable system for the vast majority of investors. He aims to eliminate the “show element” of forecasting and analyze what’s happening on the ground – now.

Michael and Alexander also discuss the difficulty of investing in tech – prediction doesn’t work there either.

In this episode of Trend Following Radio:

  • Seeing through the market forecasting flash
  • The importance of “check box” methodology
  • Simplification as sophistication
  • The concept of nowcasting
  • Understanding the whole, so you know what can be eliminated
  • Learning to watch for trend reversals

Want a FREE Trend Following DVD? Get it here

Jul 17, 2015

Continuing the theme of speculation and gambling from the previous episode, today’s Trend Following Radio guest is Blair Hull. Hull got his start playing blackjack in Nevada casinos, and later moved onto trading. He founded his investment firm, Hull Investments, in 1999. The company, which leveraged technological innovations and quantitative models, was one of the world’s premier market-making firms, trading on 28 exchanges in nine countries.

The parallels in Hull’s approach to gambling and trading are many. He stresses the importance of objectivity and sticking to the system, especially during a losing streak when emotions run high. It’s not only about brain power, it’s about discipline.

In this interview, Blair Hull and Michael Covel talk about the parallels between blackjack and stock trading, the importance of money management and discipline when following systems, and the future of trading and market prediction.

In this episode of Trend Following Radio:

  • The importance of having a strategy and sticking to it
  • Why money management and discipline are key to trading success
  • Objectivity vs. emotions in blackjack and stock trading
  • Choosing the right markers and variables
  • Consumption as a function of income and wealth
  • The future of market prediction and machine learning

Want to get a FREE Trend Following DVD? Find it here: http://www.trendfollowing.com/win

Jul 6, 2015

A May 25, 1959 Time Magazine article called “Pas de Dough” was recently forwarded to Michael Covel. It was about a professional dancer named Nicolas Darvas, who had made two million dollars trading stocks. This was probably one of the first trend following articles to appear in a major publication. Sports metaphors when it comes to trend following work great, but there are clearly others. For example, both trend following and dancing judge the public’s enthusiasm and use that as the indicator for the next move. In this monologue, Covel talks about the article and Darvas' book, breaks down the fundamentals of trend following, and explains why the philosophy behind trend following still applies today. He also comments on how trend following can be applied to the current black swan economic situations in China and Greece. What trend following and dancing have in common, the philosophical foundations of trend following, stock trading and location independence, why relying on “fundamentals” is fool’s gold, what being a silent partner in the trend means, why Darvas’ thinking from 1959 still applies today, the importance of having no ego when it comes to trading. Free trend following DVD: www.trendfollowing.com/win.

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