University of Minnesota - UMN Executive Leadership Insights
Trend Following
Book

Trend Following

How Great Traders Make Millions in Up or Down Markets

Michael Covel
FT Prentice Hall, 2004
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Editorial Rating

7

Recommendation

This is a book very much in the tradition of Jack Schwager’s Market Wizards. Like Schwager, author Michael Covel interviewed a number of great traders and attempted to capture the essence of each trader’s approach to trading. The author does a good job of presenting the basics of trend following. Though much of what he says will come as no news to anyone who has read very widely in the literature of trading, his liberal quotations from other authors enliven what would otherwise be an uphill read. The author has a good eye for a snappy quote, and getAbstract.com believes that even if you buy this book only for the quotations, you will certainly get your money’s worth. What you earn from following the trend masters’ stock tips is entirely up to you.

Summary

Trend Following

Trend following is the most consistently successful trading style of all time, yet trend followers are virtually unknown. The press ignores them, probably because trend followers defy conventional wisdom about trading and finance, and possibly because many of them shy away from publicity, working out of sparsely decorated offices far from the financial centers.

What do they know that most traders don’t? First, they have their own understanding of the market. A market is a place where buyers and sellers meet to buy and sell. Prices are the collective verdict of many buyers and sellers. This is why it is so hard to beat the market. Trend followers accept that it is all but impossible to predict the future or to see things that the rest of the market does not, so instead of trying to predict the market, they follow it. Most conventional approaches to trading fall into two categories:

  • Fundamental - Fundamental traders look at all kinds of data, including government policies, weather, corporate earnings and more, to discover the supposed truth about a stock or commodity. Their implicit assumption is that they can discover the truth before the ...

About the Author

Michael Covel is president of TrendFollowing.com. He is also managing editor of Turtletrader.com, a leading trend-following news and commentary resource.

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