Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets 1st Edition

"Cut Your Losses Short; Let your profits run on."- Widely attributed to David RicardoWhile many are familiar with David Ricardo's contribution to economics through his "Theory of Competitive Advantage." fewer are aware that he was also a large speculator in shares and British consuls (perpetual bonds) during the early 19th century, and as a result amassed a significant fortune in the process. His description on how to succeed in of speculation is easily distilled down to two words: "Trend Following."In his latest revision to the book of the same name, author Michael Covel reintroduces the reader to a trading methodology that has stood the test of time, and recently produced some of the big winners of the 2008 market debacle. He does so in a tone that often betrays bewilderment that the mainstream media for the most part have failed to pick-up on the storyline. Specifically, that the markets are not random and they can be beaten. Covel then introduces us to the characters in this story that have been on the winning side of all the major market debacles of the past 30 years.Many have often used the hyperbole of monkeys picking stocks. After one year, those that beat the market are invited to a second round of stock picking, after which the survivors pass to the third round etc, etc. This analogy is often used to describe the successful trend following trader. The implication: nothing more than blind luck was involved.However, what if many of the "monkeys" in the game all went to the same school? Or what if they happened to all be from the same zoo? Maybe they even had the same trainer and diet. At some point, the rational observer might begin to question the belief in luck and perhaps begin to suspect that there may in fact be skill involved. It is here that Trend Following is of particular use to the unbiased reader. For in this book, Covel describes not only the strategies used by traders to beat the market, but also the common philosophy that underpins their decision making process. In many cases, generations of traders can be traced back to several pioneer speculators who made their fortunes during the 1960s.Some of the legends profiled in the book: Bill Dunn, who compounded his gains at a rate of 24% a year for 28 years, or a return of over 412 times your money; John W. Henry, who used some of his winnings to buy the Boston Red Sox; Ed Seykota, who averaged 60% from 1990-2000; and Salem Abraham, who generates Texas sized returns to accompany his Texas location. There are just some of the eye-popping results turned in by the stars profiled in Trend Following.Covel's book is entertaining and yet at the same time educational, a volume that is valuable on many levels. It can be viewed a simply a story of market foibles, and how a group of like minded traders from different backgrounds used a common strategy to beat the markets. It can also be used as an educational tool, providing the philosophy behind the strategies used by these market beaters. Experienced traders can learn new techniques and follow the career of those who pioneered them. Amateurs are offered a glimpse of what might be if they are willing to take calculated risks. New to the book is groundbreaking research showing that trend following, long associated with futures market traders, is well suited to the task of managing an equity portfolio.Most importantly it is a running commentary on how the individual who seizes initiative can take control of his or her financial future rather than remain subject to the whims of others. This alone is worth the price of admission.

I like the book alot, I ve just finished the book, together with the other one of "Michael Covel", "The Complete Turtle Trader". I like this book (and the other one too) very much, because it gives the right mindset, that one needs to have to be successful in trading. That said, it doesnt mean I am successful right now in my trading life, but I think that's just a matter of time (as we speak I have 20 % profit in my entry of half an hour ago (educated well-considered leveraged), so I am happy of that too!!).I trade for about 2 years very intensively, with a small account, but I take risks, stay conservative, follow my emotinos, follow my logic, control my emotions, fight my emotions, have my fear, greed, have my fear when I should be greedy and have my greed when I suppose to be fearful. I read a lot about trading, psychology of trading, techniques, options, commodities and in short almost everything I think interessting to read. As a result of that I have been reading about 35 - 40 books, some twice, so I think as an amateur I know relatively alot, but not yet enough. About the book, I can tell you, if you are looking for a book to give you technical analysis and new methods and so on, you should better look for another book, BUT, if you already know more than basics of the market and trading and technical analysis, but you wonder: "I know alot, I try everything but I still dont win consistantly and at the end of the day (year) I 'm negative in my account, why is that and what do I need more?" and you are considering stop trading but still want to keep going, then I think this book gives you alot:- first of all, the mindset, as I mentioned before,- second of all an understanding of or feeling about the "Volatility", "Risk" the deference between these two and "drawdown".As a matter of fact, and I really mean this, since I start reading this book (and the other one, I mentioned before) I make profits. I start trading with my new mindset, two months ago, with the mindset which is probably created and definitely fortified and strengthened by this book, and since then I have once doubled my (small) account and yesterday a large drawdown and again back to double!! and I am sure its beacuse of the mindset and confidence I got from "Trend Following".For the first time I understand that drawdowns are normal and a definite part of the game. So if you really understand this FACT, with a few losses you are not going to trade like a crazy riskjunkie to compensate for those losses, cause you know that the drawdowns are just normal and you keep following your plan.After this positive talk, I have to admit that I m not a very much big fan of buy High and sell Low, I mean not as High as the real trend followers do, I guess, because I m looking for smaller trends and so in a smaller time frames, so my break-outs happen much earlier, and my exits are also faster. BUT I have to admit honestly too, that as a matter of fact most of the times when I exit with a profit of, say 40 - 50% I see that my exit's were far too soon and I let so alot of profits on the table.I hope this long review can help you some how.Cheers !!!