If you are looking for the Holy Grail of trading systems and/or a complete “turn-key” trading system: look elsewhere as this is not what this book is set to achieve. It will not reveal any trading secrets; however reading this book will make you realise that this is not what is important…
It looks like Michael Covel appreciated the concept of Market Wizards from Jack Schwager and drew inspiration from it. In a clever mix, Covel managed to overlay and enrich all the foundations of trend following with great trend follower insights.
The book covers the principles of the trend following trading philosophy and its multiple aspects: discipline, drawdowns, risk and money management, behavioral biases, prediction vs. reaction, etc. It makes for a very interesting read – both instructive and interactive.
Even with an automated trading system, you have to be in agreement with the strategy philosophy. This book helps you understand the philosophy of trend following in greater detail – you can then decide whether it suits you. Additionally it can help you strengthen your belief during the inevitable low points such as drawdowns while trading a trend following system.
The world of trend followers is relatively discreet: barely anybody has heard of Ed Seykota or Bill Dunn – but John Meriwether opening up his third hedge fund (after blowing up his previous 2 – including LTCM!) makes it to the first page of Bloomberg and the FT.
Michael Covel has spent 10 years researching and interviewing for this book. This allowed him to get in the head of the greatest trend following traders. This results in extensive quotes/pearls of wisdon from Ed Seykota, Dave Harding, Bill Dunn, John W Henry, all the greatest Trend Following Wizards. It really gives you great insights on the way they think and how they apply their market philosophy to trend following. And this is information that is not readily available anywhere else.
I have read both earlier and newest (post-2008) editions and I think the later version is worth it. Many references to the major events of 2008 help to put the text in the present context and add some relevancy (especially with trend followers outstanding performance during these times).
Additonally there is a new appendix covering in detail Trend Following for Stocks, which is of interest.
One of the main message of Trend Following (the trading philosophy and the book) is that we cannot predict. It forces society to admit that we are no as sophisticated as we think. It also points to the fact that chance might have much more to do with success of so-called “experts” rather than their “expert prediction abilities”.
One such “expert trader” Victor Niederhoffer slams the book:
I get the same sort of value from these books [Trend Following] as I do from studying the Keech cult, supernatural operators such as Uri Geller and horosope readers
You can tell that Covel takes some pleasure describing the latest blow-up from Niederhoffer’s fund in 2007 in his “Big Events” chapter.
Some people have also raised the question as to why Michael Covel primarily seems to be marketing his books and courses rather than trading for himself. Whether this is a valid point or not, this does not remove any quality from the book.
You can check and follow Michael Covel on his trend following blog to make your opinion.
I find this book very inspiring and motivating.
If you are new to trend following, this is a must-read: it will introduce you to all the basic concepts.
If you already believe in trend following, this is a must-read: it will reinforce your beliefs and motivation.
If you do not believe in trend following: this is a must-read: it is not too late to change your mind and this is the best book for it!
I have read Trend Following about 3 times now; this is a book that lives on my trading bookshelf – I know that every time I need a boost for motivation, a re-read will provide me just that.
As Larry Hite says:
The way I see it, you have two choices – you can do what I did and work for 30-plus years, cobbling together scraps of information, seeking to create a money-making strategy, or you can spend a few days reading Covel’s book and skip that three-decade learning curve.