I read this book once and this is my second visit... After went through the turtles stuff, this book suddenly crossed my mind. Coincidentally, a buddy bought me this third edition recently. As such, here I am with the refreshment on trend following.
I thought Michael Covel did well in this third edition. Latest info was added in and it makes the whole trend following more complete than ever. In fact, I remember I was still quite "amateur" during my first read on this book. Those were the days where I was busy writing codes for others. Those were the days where I was so bold that I will always search for absolute return regardless of market situation and capital in hand. Those were also the days where I enjoyed most in searching for holy grail, LOL. As such, this time around (not so "amateur", LOL), I thought I really enjoy reading this book. At the end, it is like reading my own diary. A lot of great stuff presented in the book was actually part and parcel of my career. Of course, bad stuff was there to help me grow along the way too... Hence, this book not only serves as refreshment... in fact, I think I need to fork out more time to read it more often in order to capitalize and further strengthen my good traits.
In summary; after a second read, this is still an excellent book to explore. The author did gathered as much information as possible to present the depth in examining trend following. The only setback perhaps lies with the fact that it is more like an "academically" book. At the end, it is not as interesting as the animal stuff (The Swan and The Turtles), LOL. In view of the minor setback as mentioned, I am going to rate 9/10 for this book. An excellent book to read... except that it is less attractive compares to the two animals, LOL.
Here are some nice quotes to ponder about...
It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.
The wisest trend follower I know has said that every 5 years some famous trader blows up and everyone declares trend following to be dead. Then, 5 years later, some famous trader blows up and everyone declares trend following to be dead. Well, was the problem trend following or the trader?
If you can't predict the end or top of the trend, why get out early and risk leaving profits on the table? ... in trying to protect every penny of your profits, you actually prevent yourself from making the big profits.
You want no losses and positive returns every month? Well, you could have had your money with the Ponzi-scheme of Bernard Madoff... You can't make money if you are not willing to lose. It's like breathing in, but not being willing to breath out.
In hindsight, you might ask yourself why he was trading the British pound if he was losing. The simple answer is that neither he nor anyone else could have predicted whether or not the British pound would be the next great home run.
When you stop trying to please others and concentrate on pleasing yourself, you gradually become aware of what you are passionate about in life. And when that happens, all sort of people come out of the woodwork to help you achieve your goal.
The major strategic elements have never changed in almost 30 years... The market are just the markets... I know in the past 5 years a lot of competitors have purposely lowered the risk on their model i.e. deleveraging or trying to mix with other things to reduce volatility. Of course, they have also reduced their returns. ~~~ Dunn
We don't predict the future, but we do know that the next five years will not look like the last five years.. Markets change. And our results over the next three years will not replicate the last three... ~ John W. Henry
In taking a position, price orders are allowable. In closing a position, use market orders. ~ Richard Donchian.
Giving back a profit probably seems like real risk, to us it seems like volatility. ~ John W. Henry
Obviously you don't want to overhaul a program in response to one year just because something didn't work. That's when you are almost guaranteed that it would have worked the next year had you kept it in there.
Trend following appears to be too simple... Indeed, simple ideas can take a very long time to be accepted; think of the concept of a negative number, or of zero: simple to us, but problematic to our ancestors.
The illiterate of the twenty-first century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn. ~ Alvin Toffler
To be uncertain is to be uncomfortable, but to be certain is to be ridiculous.
There are a lot of misperceptions about chess... Chess players look only as far into the future as they need to, and that usually means just a few moves ahead. Thinking too far is a waste of time. The information is uncertain. Chess is about controlling the situation at hand.
The best long-term performers in any probabilistic field such as investing, sports team management and pari-mutual betting- all emphasize process over outcome.
Winning a bad bet can be the most dangerous outcome of all, become a success of that kind can encourage you to take more bad bets in the future, when the odds will be running against you. You can also lose a good bet, no matter how sound the underlying propositions, but if you keep placing good bets, over time, the law of averages will be working for you.
There is little point in exploring Elliot Wave Theory because it is not a theory at all, but rather the banal observation that a price chart comprises a series of peaks and troughs. Depending on the time scale you use, there can be as many peaks and troughs as you care to imagine.
A robust trading system, one that is not curve fit, must ideally trade all markets at all times in all conditions. If the parameter of a system are slightly changed and the performance adjusts drastically, beware.
No matter how complex and subtle a strategy is and no matter how sophisticated it might be, it has to be possible to describe that strategy in relatively simple and intuitive terms to a sophisticated investor.
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