Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets

Introduction

In "Trend Following," Michael W. Covel reveals the secrets of the most successful trend following traders in the world. These traders have made fortunes by riding major market trends, regardless of whether the market is going up, down, or sideways.

Covel's book is based on interviews with dozens of successful trend followers, including:

• Richard Dennis: The legendary trader who made a fortune in the 1980s by trading commodities.
• Bill Lipschutz: A pioneer of trend following who has been trading successfully for over 40 years.
• Linda Bradford Raschke: A successful trader and author who has written several books on trend following.

The Basics of Trend Following

Trend following is a simple but powerful trading strategy that can be used to profit from any market. The basic idea is to buy assets that are trending up and sell assets that are trending down.

Trend followers use a variety of technical indicators to identify trends. These indicators include:

• Moving averages: A moving average is a line that shows the average price of an asset over a specified period of time. Trend followers use moving averages to identify the direction of the trend.
• Bollinger Bands: Bollinger Bands are a set of lines that show the upper and lower limits of a price range. Trend followers use Bollinger Bands to identify overbought and oversold conditions.
• Relative strength index (RSI): The RSI is a momentum indicator that measures the speed and magnitude of price changes. Trend followers use the RSI to identify trend reversals.

The Psychology of Trend Following

Trend following is not for the faint of heart. It requires discipline and patience to stay with a trend, even when it is going against you.

Covel identifies three key psychological traits that successful trend followers share:

• Confidence: Trend followers have confidence in their trading system and their ability to execute it.
• Discipline: Trend followers are disciplined enough to stay with a trend, even when it is going against them.
• Patience: Trend followers are patient enough to wait for the right trading opportunities.

The Benefits of Trend Following

Trend following can offer a number of benefits, including:

• Simplicity: Trend following is a simple trading strategy that can be easily learned and implemented.
• Robustness: Trend following is a robust trading strategy that can be used in any market.
• Profitability: Trend following can be a very profitable trading strategy, especially when combined with other trading strategies.

Conclusion

"Trend Following" is a must-read for anyone who wants to learn how to make money in the markets. Covel's book provides a wealth of information on the basics of trend following, the psychology of trend following, and the benefits of trend following.

If you are serious about making money in the markets, I highly recommend that you read "Trend Following." It is one of the best books on trading that I have ever read.