Michael Covel is out to save you! He wants to free you from worrying about every little news item that shows up in the WSJ or on CNBC. He'll show you how to stop wasting time trying to make forecasts. And, best of all, he knows how to make money in both advancing and declining markets. Sound good to you?
Well, don't get *too* excited. Trend Following is not a how-to-guide. It doesn't contain any trading "secrets" or tricks. It's really a foundational text that thoroughly describes the philosophy and concepts underlying a trading system driven solely by price trends. Covel uses both hard data and anecdotal evidence, with a strong emphasis on behavioral finance concepts throughout, to make his case.
Keep in mind that if you end up being convinced by Covel, you will have to do a fair amount of additional work to implement his strategy. In other words, just reading Trend Following will not make you ready to start making trend-based trades, much as simply reading chemistry and physics textbooks won't make you a chemist or a physicist. You will need to determine which markets to trade, your parameters for opening and closing positions, and how much risk you are willing to assume. As such, this book is not for novice investors or for people who are not able to make a deep commitment to developing their own trading methodology.
Nonetheless, Trend Following is a book every serious investor should read. Even if you don't buy everything Covel says, it is always useful to question your assumptions, preconceptions, and past actions. No trading strategy is perfect. At a minimum, Trend Following will help you recognize the flaws and weaknesses in what you're currently doing.
Bottom line: four stars, with the caveat that Trend Following is most appropriate for people who have experience trading and are comfortable moving beyond basic mutual fund and retirement account investing.
Two books for anybody who wants to learn more about behavioral finance:
Beyond Greed and Fear (Shefrin)
Why Smart People Make Big Money Mistakes And How To Correct Them (Belsky, Gilovich)
And for comparison, three well-known alternatives to trend following:
A Random Walk Down Wall Street (Malkiel): indexing, very passive compared to trend following
Unconventional Success (Swensen): wide diversification across asset classes, but with a buy-and-hold bias not found in trend following
The Only Three Questions That Count (Fisher): top-down forecasting, the antithesis of trend following