![[Review] Trend Following : Learn to Make Millions in Up or Down Markets (Michael Covel) Summarized](https://episodes.castos.com/660078c6833215-59505987/images/2327524/c1a-085k3-kpjwvk9zbwqw-paiyyg.jpg)
Show Notes
Trend Following : Learn to Make Millions in Up or Down Markets (Michael Covel)
- Amazon USA Store: https://www.amazon.com/dp/013702018X?tag=9natree-20
- Amazon Worldwide Store: https://global.buys.trade/Trend-Following-%3A-Learn-to-Make-Millions-in-Up-or-Down-Markets-Michael-Covel.html
- eBay: https://www.ebay.com/sch/i.html?_nkw=Trend+Following+Learn+to+Make+Millions+in+Up+or+Down+Markets+Michael+Covel+&mkcid=1&mkrid=711-53200-19255-0&siteid=0&campid=5339060787&customid=9natree&toolid=10001&mkevt=1
- Read more: https://mybook.top/read/013702018X/
#trendfollowing #systematictrading #riskmanagement #managedfutures #positionsizing #momentuminvesting #tradingpsychology #TrendFollowing
These are takeaways from this book.
Firstly, The core idea: price action over prediction, A central theme in Covels presentation is that trend following is not about forecasting economic news, earnings, or macro narratives. It is about responding to what price is doing. The logic is simple: markets can trend for longer than most people expect, and the trader does not need to know why a move is happening to potentially benefit from it. Instead of trying to pick tops and bottoms, trend followers typically use objective rules to identify when a market has begun moving persistently and then stay with that move until the trend weakens or reverses. This emphasis on observable behavior reduces reliance on opinions and helps avoid the trap of overconfidence in a story. Covel highlights how this approach can work in rising markets as well as falling ones because the method is direction agnostic: it can be long, short, or out. The key is consistency in execution. By prioritizing measurable signals over interpretation, the trader builds a repeatable process that can be tested and refined. This topic also clarifies why trend following often looks wrong in the moment: it buys after prices have already risen and sells after they have already fallen, accepting that capturing the middle of a move is enough.
Secondly, System design: rules, entries, exits, and position sizing, Covel describes trend following as a systematic framework, not a single indicator. The book encourages readers to think in terms of a complete decision loop: how to enter, how to exit, and how to size positions so that one trade cannot cause unacceptable damage. Common system building blocks include breakout style entries, moving average based filters, and volatility aware risk controls. While the exact parameters may differ among practitioners, the intent is to define rules that remove ambiguity, especially during stressful periods. Exits are treated as just as important as entries, because trends eventually end and open profits can disappear without a plan. Covel also emphasizes that position sizing is where many strategies succeed or fail. By adjusting trade size based on volatility or a fixed risk per trade, the trader can keep losses relatively uniform across different markets and regimes. This topic reinforces that trend following is not about being right frequently; it is about structuring trades so that typical losses are small and occasional large winners can dominate results. The system mindset also supports research and improvement, because rules can be backtested, monitored, and evaluated without relying on subjective memory or selective examples.
Thirdly, Risk management as the true edge, A major takeaway from the trend following tradition, as Covel presents it, is that controlling downside matters more than finding the perfect entry. The book frames risk management as the discipline that keeps a trader in the game long enough to benefit from rare but powerful trends. Practical risk principles include cutting losses quickly, avoiding concentrated bets, and using diversification across markets and time horizons. Trend followers accept that many trades will be small losses or small gains, so they focus on preventing any single mistake from becoming catastrophic. Covel also explores why risk management is psychologically difficult: it demands taking losses without personalizing them and resisting the urge to widen stops, average down, or double up after a drawdown. Another part of the risk discussion is the acceptance of drawdowns as a normal feature of the strategy. Because trends are intermittent, performance can be lumpy, and even robust systems can experience extended flat or losing periods. The book argues that understanding this reality ahead of time helps readers set realistic expectations and select leverage levels they can actually tolerate. In this view, risk management is not a defensive add on, it is the core mechanism that makes trend following scalable and survivable.
Fourthly, The behavioral challenge: discipline, patience, and independence, Covel underscores that trend following is simple to describe but hard to execute because it runs against common human instincts. Many people crave certainty, want to be right, and prefer strategies that feel intuitive, such as buying bargains and selling expensive assets. Trend following often requires doing the opposite, buying strength, selling weakness, and waiting patiently while nothing happens. The book highlights the emotional pressures created by whipsaws, where signals lead to small losses during choppy markets, and by the discomfort of holding winners when the crowd believes a reversal is imminent. It also addresses social pressure: trend following can look naive or mechanical to commentators who favor narratives and predictions. As a result, independence of thought becomes a competitive advantage. This topic also covers the importance of process orientation. Trend followers measure success by adherence to rules rather than by the outcome of any single trade. That mindset reduces impulsive changes and helps prevent strategy hopping, a common reason traders fail. Covel uses examples from well known systematic traders to show that long term results often come from enduring stretches that test confidence. The reader is encouraged to build habits, routines, and risk limits that make discipline easier, not heroic.
Lastly, Applicability across markets and regimes: why trends persist, Another important topic is why trend following has been applied across different asset classes and over long spans of time. Covel links trend persistence to structural and behavioral forces: investor herding, slow information diffusion, institutional constraints, and the tendency for big reallocations to occur gradually. These dynamics can create sustained moves that a rule based approach can attempt to capture. The book also explains that trend following is not tied to one market condition. It may struggle during sideways periods, but it seeks to perform during major directional moves, including crises when correlations spike and traditional portfolios can suffer. This is one reason trend strategies are often discussed as potential diversifiers rather than replacements for all investing. Covel encourages readers to think globally and cross market, because diversification can increase the number of opportunities and reduce reliance on a single instrument. This topic also addresses misconceptions, such as the belief that markets are too efficient for trends to exist or that trend following stopped working after a certain decade. By focusing on rules, risk limits, and broad opportunity sets, the strategy aims to remain adaptable even as market microstructure evolves. The reader comes away with a framework for evaluating whether trend following fits their goals, time horizon, and tolerance for uncertainty.
- Amazon USA Store: https://www.amazon.com/dp/013702018X?tag=9natree-20
- Amazon Worldwide Store: https://global.buys.trade/Trend-Following-%3A-Learn-to-Make-Millions-in-Up-or-Down-Markets-Michael-Covel.html
- eBay: https://www.ebay.com/sch/i.html?_nkw=Trend+Following+Learn+to+Make+Millions+in+Up+or+Down+Markets+Michael+Covel+&mkcid=1&mkrid=711-53200-19255-0&siteid=0&campid=5339060787&customid=9natree&toolid=10001&mkevt=1
- Read more: https://mybook.top/read/013702018X/
#trendfollowing #systematictrading #riskmanagement #managedfutures #positionsizing #momentuminvesting #tradingpsychology #TrendFollowing
These are takeaways from this book.
Firstly, The core idea: price action over prediction, A central theme in Covels presentation is that trend following is not about forecasting economic news, earnings, or macro narratives. It is about responding to what price is doing. The logic is simple: markets can trend for longer than most people expect, and the trader does not need to know why a move is happening to potentially benefit from it. Instead of trying to pick tops and bottoms, trend followers typically use objective rules to identify when a market has begun moving persistently and then stay with that move until the trend weakens or reverses. This emphasis on observable behavior reduces reliance on opinions and helps avoid the trap of overconfidence in a story. Covel highlights how this approach can work in rising markets as well as falling ones because the method is direction agnostic: it can be long, short, or out. The key is consistency in execution. By prioritizing measurable signals over interpretation, the trader builds a repeatable process that can be tested and refined. This topic also clarifies why trend following often looks wrong in the moment: it buys after prices have already risen and sells after they have already fallen, accepting that capturing the middle of a move is enough.
Secondly, System design: rules, entries, exits, and position sizing, Covel describes trend following as a systematic framework, not a single indicator. The book encourages readers to think in terms of a complete decision loop: how to enter, how to exit, and how to size positions so that one trade cannot cause unacceptable damage. Common system building blocks include breakout style entries, moving average based filters, and volatility aware risk controls. While the exact parameters may differ among practitioners, the intent is to define rules that remove ambiguity, especially during stressful periods. Exits are treated as just as important as entries, because trends eventually end and open profits can disappear without a plan. Covel also emphasizes that position sizing is where many strategies succeed or fail. By adjusting trade size based on volatility or a fixed risk per trade, the trader can keep losses relatively uniform across different markets and regimes. This topic reinforces that trend following is not about being right frequently; it is about structuring trades so that typical losses are small and occasional large winners can dominate results. The system mindset also supports research and improvement, because rules can be backtested, monitored, and evaluated without relying on subjective memory or selective examples.
Thirdly, Risk management as the true edge, A major takeaway from the trend following tradition, as Covel presents it, is that controlling downside matters more than finding the perfect entry. The book frames risk management as the discipline that keeps a trader in the game long enough to benefit from rare but powerful trends. Practical risk principles include cutting losses quickly, avoiding concentrated bets, and using diversification across markets and time horizons. Trend followers accept that many trades will be small losses or small gains, so they focus on preventing any single mistake from becoming catastrophic. Covel also explores why risk management is psychologically difficult: it demands taking losses without personalizing them and resisting the urge to widen stops, average down, or double up after a drawdown. Another part of the risk discussion is the acceptance of drawdowns as a normal feature of the strategy. Because trends are intermittent, performance can be lumpy, and even robust systems can experience extended flat or losing periods. The book argues that understanding this reality ahead of time helps readers set realistic expectations and select leverage levels they can actually tolerate. In this view, risk management is not a defensive add on, it is the core mechanism that makes trend following scalable and survivable.
Fourthly, The behavioral challenge: discipline, patience, and independence, Covel underscores that trend following is simple to describe but hard to execute because it runs against common human instincts. Many people crave certainty, want to be right, and prefer strategies that feel intuitive, such as buying bargains and selling expensive assets. Trend following often requires doing the opposite, buying strength, selling weakness, and waiting patiently while nothing happens. The book highlights the emotional pressures created by whipsaws, where signals lead to small losses during choppy markets, and by the discomfort of holding winners when the crowd believes a reversal is imminent. It also addresses social pressure: trend following can look naive or mechanical to commentators who favor narratives and predictions. As a result, independence of thought becomes a competitive advantage. This topic also covers the importance of process orientation. Trend followers measure success by adherence to rules rather than by the outcome of any single trade. That mindset reduces impulsive changes and helps prevent strategy hopping, a common reason traders fail. Covel uses examples from well known systematic traders to show that long term results often come from enduring stretches that test confidence. The reader is encouraged to build habits, routines, and risk limits that make discipline easier, not heroic.
Lastly, Applicability across markets and regimes: why trends persist, Another important topic is why trend following has been applied across different asset classes and over long spans of time. Covel links trend persistence to structural and behavioral forces: investor herding, slow information diffusion, institutional constraints, and the tendency for big reallocations to occur gradually. These dynamics can create sustained moves that a rule based approach can attempt to capture. The book also explains that trend following is not tied to one market condition. It may struggle during sideways periods, but it seeks to perform during major directional moves, including crises when correlations spike and traditional portfolios can suffer. This is one reason trend strategies are often discussed as potential diversifiers rather than replacements for all investing. Covel encourages readers to think globally and cross market, because diversification can increase the number of opportunities and reduce reliance on a single instrument. This topic also addresses misconceptions, such as the belief that markets are too efficient for trends to exist or that trend following stopped working after a certain decade. By focusing on rules, risk limits, and broad opportunity sets, the strategy aims to remain adaptable even as market microstructure evolves. The reader comes away with a framework for evaluating whether trend following fits their goals, time horizon, and tolerance for uncertainty.
