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(More customer reviews)I read this book a few years ago. I thought the book was well written and had very good principles. After reading over 100 stock trading books and as many books on investing,and reading this one for a second time, I have to say this book ranks as #1 in my personal library. The author Michael Covel has cut through all the pundits opinions about the market and presents how the most successful money mangers and traders really make huge cumulative returns over long periods of time. How do they position themselves consistently to make money? They follow trends. They create systems that tell them when to buy or sell based on the beginning of a trend in a market. They are not experts on the fundamentals of any one market, they are masters of reading the action of price and volume and the direction of the trend. They cut their losses short when they are incorrect but when they are right they let the winning trade run as high as possible and sell when the trend stops and reverses. So they get the meat of the trend, not buying at the low or selling at the high but waiting for the market to tell them to get in and then get out. Jesse Livermore and Nicholas Darvas were both trend traders who made millions along with Richard Dennis, Ed Seykota, and William O'Neal of our own era. John W. Henry bought the Boston Red Sox with his profits from managing his trend following fund. The book documents records from years of successful trading of many of trend following funds.
Trend followers do not try to predict the future, they only follow the momentum of the market and get in or out when their system tells them. They go both long and short with no bias to either. While they may have steeper draw downs in the short term they always have high returns in the long term. They almost always find themselves positioned correctly during big events, crashes, and panics because the market was already warning by the herd behavior.
In the first week of January of 2008 with the DOW failing to make new highs and a downward trend beginning in the market on increased volume and money flowing out of the market, I made the decision to take my 401k and brokerage accounts to all cash until the trend turned back possible. I stayed in 100% cash through the collapse of the stock market all the way through March 2009. I only day traded stocks in my brokerage account, and started dollar cost averaging back into mutual funds in my 401K when the DOW was at 7500 to 6500 and back to 8100. Trend following is what what helped me resist the temptation to get back into a falling market, thinking I was getting stocks cheap. I promised myself after the year 2000-2002 losses I suffered I would never give back my profits in a nasty bear market. Michael Covel's book gave me the principles I needed to lock in my 20% annual profits I made in 2003-2007. Saving me over $100,000 in losses that would have occurred from buy and hold investing. Thank you Mr. Covel, the book is worth much more than the cover price!!!
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