Trend Following – Learn to make millions in up or down markets – by Michael Covel is the Bible for trend following traders. The book is well written and contains the key principles that the most successful money managers use to profit from trending markets. After personally reading over 200 stock trading books I have to say this book ranks with the best of all titles in my personal library.
Instead of being influenced by the media and mutual fund propaganda author Michael Covel cuts through all the pundits opinions about the market and presents how the most successful money mangers and traders really make huge cumulative returns over long periods of time.
- They use proven systems that identify and follow trends.
- They create systems that give them entry and exit signals along with risk management parameters.
- They are not experts on the fundamentals of any market, but their systems are masters of measuring the price action in all markets.
They cut their losses short when they are incorrect but when they are right they let the winning trade run as high as possible. They also unemotionally sell when their exit signal says the trend is coming to an end or reversing. So they get the meat of the trend, not buying at the low or selling at the high, but waiting for the market to tell them to get in and then when to get out.
Readers want proof that trend trading works? The Legendary Jesse Livermore and Nicolas Darvas were also both trend traders who made millions along with Richard Dennis, Ed Seykota, and William O’Neal of our own time. John W. Henry bought the Boston Red Sox with his profits from managing his trend following fund. The book documents records from year after year of successful trading by many trend following funds.
Trend followers do not try to predict the future, they only follow the momentum of the market and get in or out when their system tells them to do so.
They go both long and short based on their systems with no bias to bullishness or bearishness. While they may at times have steeper draw downs in the short term they always have returns on capital in the long term.
They almost always find themselves positioned correctly during big events, crashes, and panics because the market was already warning with the herd behavior showing fear or greed in the price action. This edition expands on how the trend followers made huge returns during October of 2008 because they were already short due to the trend at the beginning of the month. Trend followers made major returns in the financial panic of 2008-2009 while the vast majority of investors lost severely.
While you will not get proprietary trend trading systems with the $25 for this book, you will get inside the heads of some of the world’s greatest trend traders. I assure you as a trader this could be the best $25 you will ever spend.
Many years ago an earlier edition of this book really helped me solidify my trading systems and plans and understand how to make money from trends alone. I give this book and Michael Covel the most credit from teaching me in advance how to think like a trader and not an investor during the carnage of the financial panic. I would say Covel’s books saved me from six figure losses by changing my perspective from investing to trend trading.