Trend Following strategy by Michael Covel.

This article dives into the world of trend following, a trading strategy championed by Michael Covel's book. It reveals the secrets behind how traders like Dr. William Dunn, a trend following legend, achieved superior returns compared to the market.

Trend Following Book by Michael Covel, it’s about how traders make profit by simply following the trend, traders can make profit by simply following the trend rather than trying to catch the top and bottom of the trade.

Why Buy Low, Sell High When You Can Ride the Wave?

Traditional wisdom tells you to buy low and sell high. But trend following flips the script. Here, you enter the trade after the market has confirmed an uptrend by surpassing a previous high. This strategy capitalizes on the momentum, aiming to stay on board for the long haul.

This book will take us through the rides of Dunn Capital, founded by DR. Willliam A Dunn, one of the best trend followers in the history. And here is an example of his returns. 

Dunn Capital significantly outpaced the S&P, achieving a 16.42% return compared to the market's 12.16%. This demonstrates the effectiveness of trend following in capturing market gains.

 Covel's Core Principles:

• Embrace the Trend, Not the Prediction: Forget trying to pinpoint the market's peak or bottom. Focus on identifying and following the established trend.
• Letting Profits Run Wild: Don't be afraid to let your winning trades flourish. Trend following thrives on maximizing profits by staying invested as the trend continues.
• Risk is the Price of Admission: Significant rewards often come with calculated risks. Trend following acknowledges this by accepting losses as part of the game.
• Emotional Intelligence is Your Superpower: Discipline, patience, and objectivity are the hallmarks of a successful trend follower. Conquer emotions like fear, greed, and impatience to make sound decisions.

Taming the Emotional Beasts:

The book identifies emotional pitfalls that can derail even the most well-intentioned traders:

• Lack of Discipline: Knowledge accumulation and laser focus are crucial for trading success. Don't blindly follow others' advice; educate yourself.

• The Impatience Trap: Trading isn't about chasing a quick thrill. It requires staying calm and objective to make calculated moves.

• Marrying Your Position: Don't get emotionally attached to your trades. Let your winners run and cut your losses short.

• The Allure of Greed: Resist the urge to time the market perfectly. Trend following focuses on capturing the overall trend, not the exact highs and lows.

• Newsflash: News Doesn't Predict the Market: Don't base your decisions on fleeting news headlines. The market is a complex beast, and past performance is no guarantee of future results.

Key Takeaways:

• Intuition is a Skill: Hone your intuition through experience and knowledge. It's not a magical gift, but a honed ability.

• Simple Yet Profound: Don't confuse a straightforward strategy with simplistic thinking. Trend following offers a powerful framework while acknowledging the market's complexities.

Remember: Trading is a marathon, not a sprint. While initial profits may be tempting, true success lies in mastering your emotions, embracing calculated risks, and capitalizing on trends. By following these principles, you can gain an edge in the market, even if it means someone else takes the opposite side of your winning trade. After all, in the world of trading, one participant's gain is another's loss.

Trading is the hardest way to make easy money, sure initially everyone while starting their trading career experience profit, but over a period of time it changes, and we start facing losses. And such horrendous losses. At that time, we come face to face with our true emotions. Instead of giving up get your self in control, master the arts of self-discipline, and be patient because you cant always make money.

But you can have edge over others, remember you don’t have to beat the market we want to beat the people. Trading is give and take of money, if we are making profit there is someone on the other side who is facing lost. Because where are our profits coming from its from the people who got in and got out at the wrong time.

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