Trend Following (Michael Covel)

Trader's Library #35 · Trading methods and craft. A manifesto for trend following: react to price, don't guess the future.

Author: Michael Covel · Original: Trend Following · Year: 2004 · Usefulness for traders: ★★★★☆

What it's about

A book about the trend-following strategy: the history of CTA funds (including Bill Dunn, John W. Henry, Ed Seykota and David Harding), their results in crises and their philosophy: don't predict, just react to price.

What it gives a trader

It presents the opposite of forecasting: price is the only information worth reacting to, losses are small and frequent, and gains are rare and large. A good cure for the need to be right and to predict.

Lessons for traders

• you don't have to predict to make money: reacting is enough
• the distribution of results is skewed: a few trades make the whole result
• let profits run, cut losses (the disposition effect, Atlas of biases #36)

What to watch out for

Covel is an ardent advocate of the strategy and plays down its weak periods. Lots of repetition.

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

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Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.