Trend Following: How Great Traders Make Millions in Up or Down Markets [Hardcover]

A recent interview with Michael Covel on Bloomberg Radio (6.5 MB MP3 audio file) about trend following.

"Please read [Trend Following] whether you think you have an interest in trend following or are not quite sure. I guarantee you will be happy that you took the time. It, of course, covers how trend following works, how it's done, and who can do it, and it doesn't beat around the bush with generalities. Again, get this book. Covel has hit a homerun with it."
Gail Osten, Editor-in-Chief
Stocks, Futures & Options Magazine
Official Journal for Personal Investing in Stocks, Futures and Options

"A mandatory reference for anyone serious about alternative investments."
Jon Sundt, President and CEO of Altegris

"Michael Covel does an excellent job of educating his readers about the little-known opportunities available to them through one of the proven best hedge fund strategies. This book is like gold to any smart investor."
Christian Baha, CEO, Superfund

"A most interesting book -- definitely a 'must have' on your shelf. Pull out the plastic and get it!...Trend Following is well constructed, well written and an excellent distillation of the research undertaken by the author. Backed up by trading 'legends' like Ed Seykota, it convincingly argues that the most successful trading systems are based on trend following...While you may read the book in bed, especially the first time, it is best read at a desk with a notepad handy. While seeming to come from the perspective of technical analysis it is still a very good book on trading psychology...The book is both a great read and an insightful textbook for all traders and investors."
Garnett Znidaric
Your Trading Edge Magazine/strong>
Australia

"Michael Covel's Trend Following: Essential."
Ed Seykota
Trend Follower for 35 years, Incline Village, NV
The Trading Tribe
Ed was originally profiled in The Market Wizards by Jack Schwager

"Michael Covel's book is the definitive guide to trend trading. Backed by real world results from some of the biggest and best money managers in the United States, his book will put you on the path to successful trend trading."
Larry Connors
CEO, TradingMarkets.com

"Covel has created a very rare thing - a well-documented and thoroughly researched book on trend following that is also well-written and easy to read. It touches on a wide variety of the principles and practices which make for successful trend following. This is one book that traders at all levels will find of real value."
John Mauldin
Millennium Wave Investments, Arlington, TX
Author of Bull's Eye Investing and editor of Thoughts from the Frontline

"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.
Author of Trade Your Way to Financial Freedom
President, International Institute of Trading Mastery, Inc.
Van was originally profiled in The Market Wizards by Jack Schwager.

This book is the result of an eight-year "hazardous journey" for thetruth about Trend Following. It fills a void in a marketplace inundatedwith books about finance and trading but lacking any resource or, forthat matter, practically any reference to what we believe is the beststrategy to consistently make money in the markets. That strategy isknown as Trend Following:

"Let's break down the term 'Trend Following' into its components.The first part is 'trend.' Every trader needs a trend to make money. Ifyou think about it, no matter what the technique, if there is not atrend after you buy, then you will not be able to sell at higher prices. . . 'Following' is the next part of the term. We use this word becausetrend followers always wait for the trend to shift first, then 'follow'it."

Trend Following seeks to capture the majority of a trend, up ordown, for profit. It trades for profits in the major assetclasses--stocks, bonds, currencies, and commodities. However simple thebasic concepts about Trend Following are, they have been widelymisunderstood. Our desire to correct this state of affairs is what, inpart, launched our research. We wanted to be as objective as possible,so we based our writing on the available data:

• Trend followers' month-by-month performance histories.
• Trend followers' published words and comments over the last 30years.
• News accounts of financial disasters.
• Newsaccounts of the losers in those financial disasters.
• Charts ofmarkets traded by trend followers.
• Charts of markets traded bylosers in the financial disasters.

If we could have developed a book comprised of only numbers, charts,and graphs of Trend Following performance data, we would have. However,without any explanation, few readers would have appreciated all of theramifications of what the data showed. Therefore our approach to writingTrend Following became similar to the one Jim Collins describes in Goodto Great, in which a team of researchers generated questions,accumulated data in their open-ended search for answers, and thenenergetically debated it.

Trend followers we studied form a sort of underground network ofrelatively unknown traders who, except for an occasional article, themainstream press has virtually ignored. What we have attempted to do islift the veil, for the first time, on who these enormously successfultraders are, how they trade, and what is to be learned from theirapproach to trading that we might apply to our own portfolios.

Trend Following challenges much of the conventional wisdom aboutsuccessful trading. We were determined to avoid being influenced byknowledge institutionalized and defined by Wall Street. We were adamantabout fighting "flat earth" thinking. During our research, we tried toavoid starting with an assumption and then finding the data to supportit. Instead we asked the question and then, objectively, doggedly, andslowly, let the answer reveal itself.

If there was one factor that motivated us to work in this manner, itwas simple curiosity. The more we uncovered about trend followers, themore we wanted to know. For example, one of our earliest questions waswho profited when Barings Bank collapsed in 1995. Our search unearthedBarings Bank-related performance data including that of trend followerJohn W. Henry (now the majority owner of the Boston Red Sox). His trackrecord generated new questions, such as, "How did he discover TrendFollowing in the first place?" and "Has his approach changed in anysignificant way in the past 20 years?"

We were also curious about who won the $1.9 billion Long TermCapital Management lost during August and September 1998. We wanted toknow why the biggest banks on Wall Street would invest $100 billion inan options pricing model, Nobel prize-winning or not. Further,considering what mutual fund managers have lost in the past few yearsand what successful trend followers have earned during the same timeperiod, we could not understand why so few investors know anything aboutTrend Following. We also became interested in:

• How trend followers win in the zero-sum game of trading.
• Why Trend Following has been the most profitable style oftrading.
• The philosophical framework of trend followers'success.
• Timeless principles of Trend Following.
• TheTrend Following worldview of market behavior.
• Reasons why TrendFollowing is so enduring.

Many of the trend followers we studied are reclusive and extremelylow key. Some discovered Trend Following on their own and used it tomake their fortunes out of home offices. Bill Dunn, a successful trendfollower who has beaten the markets for over 25 years, works out of aquiet, spartan office in a Florida coastal town. For Wall Street, thisapproach to trading is tantamount to sacrilege. It goes against all thecustoms, rituals, trappings, and myths we have grown accustomed toassociating with Wall Street success. In fact, it is our hope that ourprofiles of trend followers will correct the public's misconception of asuccessful trader as a harried, intense workaholic who spends 24/7 inthe labyrinth of a Wall Street trading firm, surrounded by monitors andscreaming into a phone.

We've assembled the first comprehensive look at Trend Following, butthis is neither a course nor the only resource you will ever need.However.

We have tried to make the material accessible and interesting enoughso it might give you an occasional "aha" experience. However, if you'relooking for trading "secrets," you need to look elsewhere. There arenone. If you're in the mood for stories about what it's like inside atypical Wall Street firm or how greedy traders sow the seeds of theirdestruction, like in Den of Thieves, or Barbarians at the Gate, we willnot meet your needs.

You may have noticed that I use "we" instead of "I" when describingthe process of writing this book. That's because it could not have beenwritten without the generosity of the traders, professors, investors,colleagues, and friends who graciously shared their wisdom and tradingexperiences with me. Without their support, hard work, long hours, andcreativity, Trend Following would still be an ongoing hazardous journey.So if there is any "honor and recognition" to be given, it is toeveryone who participated, not just the person whose name appears on thecover