Praise For - Trend Following Trading Systems & Research From Michael Covel
Praise for Tren d Followin g“The way I see it, you have two choices—you can do what I did and work for 3 0 -plusyears, cobbling together scraps of information, seek ing to create a money-mak ingstrategy, or you can spend a few days reading Covel’s Trend Following and sk ip thatthree-decade learning curve.”—Larry Hite, profiled in Market Wizards“Michael Covel’s Trend Following: Essential.”—Ed Seyk ota, profiled in Market Wizards“Trend Following by Michael Covel? I’m long this book .”—Bob Spear, Mechanica“[Trend Following] did a superb job of covering the philosophy and think ing behindtrend following (basically, why it work s). You might call it the Market Wizards ofTrend Following.”—Van K. Tharp, PhD, profiled in Market Wizards“[Trend Following] documents a great deal of what has made trend followingmanagers a successful part of the money management landscape (how they managerisk and investment psychology). It serves as a strong educational justification onwhy investors should consider using trend following managers as a part of an overallportfolio strategy.”—Tom Basso, profiled in The New Market Wizards“I am very pleased to see Michael Covel’s updated version of Trend Following; one ofmy favorite trading book s out of the hundreds that I have read. He has doubled thesize of this edition and expounded on the process used by legendary trend followingtraders. The traders in this book made millions by getting on the right side of trendsand managing risk in diversified mark ets. This book should be studied by any serioustrader or investor.”—Steve Burns, NewTraderU.com
“Trend Following: Definitely required reading for the aspiring trader.”—David S. Druz, Tactical Investment Management“A mandatory reference for anyone serious about alternative investments.”—Jon Sundt, Altergris“Michael Covel does an excellent job of educating his readers about the little-k nownopportunities available to them through one of the proven best hedge fund strategies.This book is lik e gold to any smart investor.”—Christian Baha, Superfund“Covel has created a very rare thing—a well-documented and thoroughly researchedbook on trend following that is also well written and easy to read. This is one bookthat traders at all levels will find of real value.”—John Mauldin, Mauldin Economics“I think that Michael’s Trend Following is an outstanding read from which allinvestors can learn to trade mark ets better by limiting their risk s and maximizingtheir profits through a more disciplined approach to investments.”—Marc FaberManaging Director, Marc Faber LimitedEditor, “Gloom, Boom & Doom Report”
Trend FollowingFifth EditionHow to Make a Fortune in Bull, Bear,and Black Swan MarketsMichael W. Covel
Cover design: WileyCopyright 2 0 1 7 by Michael W. Covel. All rights reserved.Published by John Wiley & Sons, Inc., Hobok en, New Jersey.The fourth edition of Trend Following was published by FT Press in 2 0 0 9 .Published simultaneously in Canada.No part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying,recording, scanning, or otherwise, except as permitted under Section 1 0 7 or 1 0 8 ofthe 1 9 7 6 United States Copyright Act, without either the prior written permission of thePublisher, or authorization through payment of the appropriate per-copy fee to theCopyright Clearance Center, Inc., 2 2 2 Rosewood Drive, Danvers, MA 0 1 9 2 3 , (9 7 8 )7 5 0 -8 4 0 0 , fax (9 7 8 ) 6 4 6 -8 6 0 0 , or on the Web at www.copyright.com. Requests to thePublisher for permission should be addressed to the Permissions Department, John Wiley& Sons, Inc., 1 1 1 River Street, Hobok en, NJ 0 7 0 3 0 , (2 0 1 ) 7 4 8 -6 0 1 1 , fax (2 0 1 ) 7 4 8 -6 0 0 8 ,or online at http://www.wiley.com/go/permissions.Limit of Liability/Disclaimer of Warranty: While the publisher and author have used theirbest efforts in preparing this book , they mak e no representations or warranties withrespect to the accuracy or completeness of the contents of this book and specificallydisclaim any implied warranties of merchantability or fitness for a particular purpose. Nowarranty may be created or extended by sales representatives or written sales materials.The advice and strategies contained herein may not be suitable for your situation. Youshould consult with a professional where appropriate. Neither the publisher nor authorshall be liable for any loss of profit or any other commercial damages, including but notlimited to special, incidental, consequential, or other damages.For general information on our other products and services or for technical support,please contact our Customer Care Department within the United States at (8 0 0 ) 7 6 2 2 9 7 4 , outside the United States at (3 1 7 ) 5 7 2 -3 9 9 3 or fax (3 1 7 ) 5 7 2 -4 0 0 2 .Wiley publishes in a variety of print and electronic formats and by print-on-demand.Some material included with standard print versions of this book may not be includedin e-book s or in print-on-demand. If this book refers to media such as a CD or DVD thatis not included in the version you purchased, you may download this material at http://book support.wiley.com. For more information about Wiley products, visit www.wiley.com.Library of Con gress Catalogin g-in -Pu blication Data:Names: Covel, Michael W., author.Title: Trend following : how to mak e a fortune in bull, bear and black swanmark ets / Michael W. Covel.Description: Fifth edition. Hobok en : Wiley, 2 0 1 7 . Series: Wiley trading Revised edition of the author’s Trend following. Includesbibliographical references and index.Identifiers: LCCN 2 0 1 6 0 5 6 6 6 6 (print) LCCN 2 0 1 6 0 5 7 5 7 5 (ebook ) ISBN9 7 8 1 1 1 9 3 7 1 8 7 8 (hardback ) ISBN 9 7 8 1 1 1 9 3 7 1 9 1 5 (ePDF) ISBN 9 7 8 1 1 1 9 3 7 1 9 0 8(ePub) Subjects: LCSH: Investments. Stock s. BISAC: BUSINESS & ECONOMICS /Commodities.Classification: LCC HG4 5 2 1 .C8 2 2 0 1 7 (print) LCC HG4 5 2 1 (ebook ) DDC3 3 2 .6 —dc2 3LC record available at https://lccn.loc.gov/2 0 1 6 0 5 6 6 6 6
He was impregnably armored by his good intentions and his ignorance.—Graham Greene, The Quiet AmericanYesterday don’t matter if it’s gone.—The Rolling Stones, “Ruby Tuesday”
ContentsForeword by Barry L. Ritholtz . . . . . . . . . . . . . . . . . . . . . . . xvPreface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xixSection I Trend Following Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Trend Following . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Speculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Winning versus Losing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Investor versus Trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0Fundamental versus Technical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1Discretionary versus Systematic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5Hiding in Plain Sight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7Change Is Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9Follow the Trend to the End When It Bends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2Surf the Waves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 62 Great Trend Followers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1David Harding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3Bill Dunn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7John W. Henry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 9Ed Seyk ota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2Keith Campbell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9Jerry Park er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4Salem Abraham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5Richard Dennis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7Richard Donchian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3Jesse Livermore and Dick son Watts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7ix
xContents3 Performance Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1Absolute Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2Volatility versus Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9Correlation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 4Zero Sum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 6George Soros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 8Berk shire Hathaway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 14 Big Events, Crashes, and Panics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 7Event 1 : Great Recession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 9Event 2 : Dot-com Bubble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 2Event 3 : Long-Term Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 5Event 4 : Asian Contagion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 7Event 5 : Barings Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 1Event 6 : Metallgesellschaft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4Event 7 : Black Monday . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 75 Thinking Outside the Box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Baseball . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Billy Beane . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Bill James . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stats Tak e Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Human Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Prospect Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Emotional Intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Neuro-Linguistic Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Trading Tribe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Curiosity, Not PhDs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Decision Making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Occam’s Razor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Fast and Frugal Decision Mak ing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Innovator’s Dilemma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Process versus Outcome versus Gut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 The Scientific Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Critical Think ing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Linear versus Nonlinear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Compounding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Holy Grails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Buy and Hope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Warren Buffett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Losers Average Losers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Avoiding Stupidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11215216217222225228229231236
Contentsxi1 0 Trading Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Risk , Reward, and Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Five Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Your Trading System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Frequently Ask ed Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1 The Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Don’t Blame Me . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Decrease Leverage, Decrease Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Fortune Favors the Bold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section II1111111Section III247248252263264273274276277278Trend Following Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 12345678Ed Seykota . . . . . . . .Martin Lueck . . . . . . .Jean-Philippe BouchaudEwan Kirk . . . . . . . . .Alex Greyserman . . . .Campbell Har vey . . . . .Lasse Heje Pedersen . .223333389113563519537Trend Following Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8 11 9 A Multicentennial View of Trend Following . . . . . . . . . . . . . . . . . . . . . . .The Tale of Trend Following: A Historical Study . . . . . . . . . . . . . . . . . . . . . . . . .Return Characteristics over the Centuries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Risk Characteristics over the Centuries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Portfolio Benefits over the Centuries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 0 Two Centuries of Trend Following . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Trend Following on Futures since 1 9 6 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Extending the Time Series: A Case-by-Case Approach . . . . . . . . . . . . . . . . . . . .Trend over Two Centuries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3833853883984004054084124172 1 Trend Following . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction to Different Trend Following Models . . . . . . . . . . . . . . . . . . . . . . . .Diversification between Different Trend Following Models . . . . . . . . . . . . . . . . .Aspect’s Approach to Trend Following . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Aspect’s Model Compared to Other Trend Following Models . . . . . . . . . . . . . . . .4254254274294312 2 Evaluating Trading Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Testing in Other Fields of Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Revaluating the Candidate Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Two Views of Multiple Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .False Discoveries and Missed Discoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Haircutting Sharpe Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .An Example with Standard and Poor’s Capital IQ . . . . . . . . . . . . . . . . . . . . . . . .435435437440442444445
xiiContentsIn Sample and Out of Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 6Trading Strategies and Financial Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 72 3 Black Box Trend Following—Lifting the Veil . . . . . . . . . . . . . . . . . . . . . . .The Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Performance Results and Graphs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sector Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Performance of Long versus Short Trades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stability of Parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Are CTAs a Diversifier or a Hedge to the SP5 0 0 ? . . . . . . . . . . . . . . . . . . . . . . . .4514524564584614634662 4 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Optimal Betting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Hunches and Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Pyramiding and Martingale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Optimizing—Using Simulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Optimizing—Using Calculus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Optimizing—Using the Kelly Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Some Graphic Relationships Between Luck , Payoff,and Optimal Bet Fraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nonbalanced Distributions and High Payoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . .Almost-Certain-Death Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Uncle Point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Measuring Portfolio Volatility: Sharpe, VaR, Lak e Ratio, and Stress Testing . . . .Stress Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Portfolio Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Position Sizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Psychological Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4714714714734734744744754774782 5 How to GRAB a Bargain Trading Futures . . . Maybe . . . . . . . . . . . . . . . . . . . .How to GRAB a Bargain Trading Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Following Trends Is Hard Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Figuring Out How the Pros Do It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A Computer Model of the Pros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A Terrible Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Solving the Mystery—Why Does the GRAB System Lose? . . . . . . . . . . . . . . . . .Often It Is Out of Sync with the Mark et . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Worse Still, It Misses the Best Moves! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Maybe Being Profitable Means Being Uncomfortable? . . . . . . . . . . . . . . . . . . . . .GRAB Trading System Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Buys on Break of Support, Sells on Break of Resistance . . . . . . . . . . . . . . . . . . 82483484485485486
ContentsxiiiTesting Reveals Some Behavior I Do Not Expect . . . . . . . . . . . . . . . . . . . . . . . . .Difference between Parameter Values Defines Character of GRAB System . . . .GRAB Trading System Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 6 Why Tactical Macro Investing Still Makes Sense . . . . . . . . . . . . . . . . . . . .Managed Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Defining Managed Futures and CTAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Where Institutional Investors Position Managed Futures and CTAs . . . . . . . . . .Sk ewness and Kurtosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Basic Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stock s, Bonds, Plus Hedge Funds or Managed Futures . . . . . . . . . . . . . . . . . . . .Hedge Funds Plus Managed Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stock s, Bonds, Hedge Funds, and Managed Futures . . . . . . . . . . . . . . . . . . . . . .2 7 Carr y and Trend in Lots of Places . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Carry and Trend: Definitions, Data, and Empirical Study . . . . . . . . . . . . . . . . . .Carry and Trend in Interest Rate Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Trend and Carry across Asset Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Carry and Trend across Rate Regimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 8 The Great Hypocrisy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41545549Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .After word by Larr y Hite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .569575Trend Following Podcast Episodes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .579583621Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .635639641
PrefaceMen wanted for hazardous journey. Small wages. Bitter cold. Long monthsof complete darkness. Constant danger. Safe return doubtful. Honor andrecognition in case of success.1Want to tak e the financial journey to a new investing philosophythat might very well affect the rest of your moneymak ing life? I can’tguarantee the yellow brick road, but I can promise the red pill will leaveyou wide awak e.In late 2 0 1 6 The Wall Street Journal reported that Steve Edmundson, the investment chief for the Nevada Public Employees’ RetirementSystem, has no cowork ers, rarely tak es meetings, and eats leftovers athis desk . His daily trading strategy: Do as little as possible, usually nothing. The Nevada system’s 3 5 billion in stock s and bonds are all in lowcost funds that mimic indexes. He may mak e one change to the portfolioa year.2Not exactly a life changing revelation, I k now, but that do-nothing,sit-on-your-hands investing premise doesn’t stop with one-man shows.Dimensional Fund Advisors LP (DFA), the sixth-largest mutual fundmanager, is drawing in nearly 2 billion in net assets per month at a timewhen investors are fleeing other firms. DFA is built on the bedrock beliefthat active management practiced by traditional stock pick ers is futile, ifnot an absurdity. DFA’s founders are pioneers of index funds.3Now we are getting somewhere, because just about everyone hasmoney tied up in an index fund—which in 2 0 1 7 is not exactly pioneering. But the much larger issue at hand, unk nown to most, is that there isan academic theory that allows anyone to confidently index.xixNearly every time I strayedfrom the herd, I’ve madea lot of money. Wanderingaway from the action is theway to find the new action.Jim RogersTo receive my freeinteractive trend followingpresentation send apicture of your receipt toreceipt@trendfollowing.com.
xxQ: Do you pencil it in first?A: No, you just startdrawing.Q: But don’t you makemistakes?A: There is no such thingas a mistake. A mistakeis an opportunity to dosomething else. You have toleave it and let nature takeit course.Ralph Steadman, British artist bestknown for his work with American authorHunter S. Thompson, talking to AnthonyBourdainPrefaceThe efficient market theory (EMT) states asset prices fully reflectall available information. This means it is impossible for averageinvestors—or superstars, for that matter—to beat the market consistently on a risk-adjusted basis, since market prices should only reactto new information or changes in discount rates. EMT, set in motionwith Louis Bachelier’s PhD thesis published in 1900, and developedby University of Chicago professor Eugene Fama, argues stocks alwaystrade at fair value, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices.4Let me drop the nuclear warhead on that perspective.There is a mind-numbingly large hole in this cool-sounding theory.EMT by definition leaves the epic October 2008 stock market meltdownout of the academic equation. And for those who know about the sausage making of writing peer review papers or engineering a PhD, muchof modern finance’s foundation was bricked together with EMT mortar.Fama was ultimately awarded the 2013 Nobel Prize in Economic Sciencesbecause his findings “changed market practice”—that is, the worldwideacceptance of index funds.Those findings are the generally accepted status quo.Not everyone, however, is a true believer guzzling the Kool-Aid.One of the first and loudest critics of EMT was famed mathematician Benoit Mandelbrot. He saw EMT proponents sweep big events like2008 under the carpet, like kids house cleaning for the first time, callingthem “acts of God.” French physicist Jean-Philippe Bouchaud sees EMTmarketing in play: “The efficient market hypothesis is not only intellectually enticing, but also very reassuring for individual investors, whocan buy stock shares without risking being outsmarted by more savvyinvestors.”5Bouchaud continues: “Classical economics is built on very strongassumptions that quickly become axioms: the rationality of economicagents, the invisible hand and market efficiency, etc. An economistonce told me, to my bewilderment: ‘These concepts are so strong thatthey supersede any empirical observation.’ As Robert Nelson arguedin his book, Economics as Religion, ‘the marketplace has been deified.’ In reality, markets are not efficient, humans tend to be overfocused in the short-term and blind in the long-term, and errors getamplified through social pressure and herding, ultimately leadingto collective irrationality, panic and crashes. Free markets are wildmarkets.”6
PrefaceDavid Harding, a man you might not k now yet, ratchets up thepolemic by describing EMT in apocalyptic terms: “Imagine if the economy as we k now it was built on a myth
"Michael Covel's Trend Following: Essential." —Ed Seyk ota, pro!led in Market Wizards "Trend Following by Michael Covel? I'm long this book ." —Bob Spear, Mechanica "[Trend Following] did a superb job of covering the philosophy and think ing behind trend following (basically, why it work s). You might call it the Market Wizards of
Song of Praise Knut Nystedt Praise the Lord! Praise the Lord from the heavens. Praise the Lord! Praise the Lord in the heights. Praise him all his angels, praise him all his hosts. Praise him sun and moon, praise him all you shining stars! Praise him you highest heavens, and the waters above the heavens.
Bruksanvisning för bilstereo . Bruksanvisning for bilstereo . Instrukcja obsługi samochodowego odtwarzacza stereo . Operating Instructions for Car Stereo . 610-104 . SV . Bruksanvisning i original
Since 1996 Michael Covel has provided top of the line trend trading systems and education to thousands in 70 countries." My research firm Trend Following is pleased to announce two additional trend following systems. These are stand-alone trend following trading systems that each tackle great trend following trading from a different .
Two Styles of Trading With-Trend Seeks to enter a position in alignment with the preexisting trend, or at the beginning of a new trend. Common structures are pullbacks and breakouts. Ideal entries are often around "centers". Counter Trend Looks to take positions against the current dominant trend on the trading timeframe.
10 tips och tricks för att lyckas med ert sap-projekt 20 SAPSANYTT 2/2015 De flesta projektledare känner säkert till Cobb’s paradox. Martin Cobb verkade som CIO för sekretariatet för Treasury Board of Canada 1995 då han ställde frågan
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Hotell För hotell anges de tre klasserna A/B, C och D. Det betyder att den "normala" standarden C är acceptabel men att motiven för en högre standard är starka. Ljudklass C motsvarar de tidigare normkraven för hotell, ljudklass A/B motsvarar kraven för moderna hotell med hög standard och ljudklass D kan användas vid
“Am I my Brother’s Keeper?” You Bet You Are! James 5:19-20 If every Christian isn’t familiar with 2 Timothy 3:16-17, every Christian should be. There the Apostle Paul made what most believe is the most important statement in the Bible about the Bible. He said: “All Scripture is breathed out by God and profitable for teaching, for reproof, for correction, and for training in .
