Trend Following with Michael Covel

Michael Covel is the voice of Trend Following Radio with 3M+ listens. He is also the bestselling author of TurtleTrader & the classic Trend Following. Trading, economics, human behavior & entrepreneurship--all passionately explored. Guests over 300+ episodes include Nobel Prize winners Daniel Kahneman, Vernon Smith, Harry Markowitz & Robert Aumann. More notables: Tim Ferriss, Ed Seykota, Jim Rogers, Ewan Kirk, Larry Hite, Jean-Philippe Bouchaud, Jack Schwager, Marc Faber, Michael Mauboussin, James Altucher, Gerd Gigerenzer, Dan Ariely, Steven Kotler, Jason Fried, Sally Hogshead, Walter Williams and Tucker Max. All episodes always at
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Michael Covel is the voice of Trend Following Radio with 3M+ listens. He is also the bestselling author of TurtleTrader & the classic Trend Following. Trading, economics, human behavior & entrepreneurship--all passionately explored. Guests over 300+ episodes include Nobel Prize winners Daniel Kahneman, Vernon Smith, Harry Markowitz & Robert Aumann. More notables: Tim Ferriss, Ed Seykota, Jim Rogers, Ewan Kirk, Larry Hite, Jean-Philippe Bouchaud, Jack Schwager, Marc Faber, Michael Mauboussin, James Altucher, Gerd Gigerenzer, Dan Ariely, Steven Kotler, Jason Fried, Sally Hogshead, Walter Williams and Tucker Max. All episodes always at

Nov 23, 2015

Today marks 400 episodes on Trend Following radio. To celebrate Michael has put together a compilation of Tom Basso interviews. Tom has been on Trend Following Radio four times and his interviews have been among the most popular episodes airing on the show. Michael plays the interviews back to back and throws in a bonus interview at the beginning. The bonus excerpt is a Tom Basso presentation from the early to mid 1990s.

Tom Basso is most famously known as “Mr. Serenity” in Jack Schwager’s “The New Market Wizards”. Now retired from managing client money, Tom was president and founder of Trendstat Capital Management. He became a registered investment advisor in 1980, a registered commodities advisor in 1984, and was elected to the board of the National Futures Association in 1998. Tom is the author of two books, “Panic-Proof Investing” and “The Frustrated Investor”. Today, he trades his own money.

Throughout this 4 1/2 hour podcast Michael and Tom cover a broad range of topics including: Tom’s background and how he got into trading, speculation, emotional rushes, emotional devastation, catastrophic events, separating trading from politics, behavioral economics, advice to newcomers entering the CTA industry, location independence, time management, stoicism, black swans, and the importance of routine.

Michael and Tom also go through listener questions spanning topics including: trading regrets, money management vs. trading, tinkering with current systems, drawdowns, one-system vs. multiple systems, thoughts on Alan Watts, emotions during both losing and winning periods, exit strategies, practice trading vs. live trading, money management, risk control, how to handle skeptics, serenity, John W. Henry, coin flip entry method, percent betting, comfort with uncertainty, initial capital at risk vs. unrealized gains, and fighting against your gut reaction. This podcast includes a wealth of knowledge worth listening to over and over again.

Nov 20, 2015

On today’s episode of Trend Following Radio Michael Covel interviews Brett Steenbarger. This is his 2nd appearance on Trend Following Radio. He is a Clinical Associate Professor of Psychiatry at New York State University, author of “The Daily Trading Coach,” “The Psychology of Trading,” and “Enhancing Trader Performance.” His newest work is “Trading Psychology 2.0: From Best Practices to Best Processes.”

Michael and Brett start the podcast off by asking the question, “Do people really have that burning desire to succeed?” Brett says he does believe traders are drawn to trading for the money outcome, but also for the allure of not working a 9-5 job or the dream of scoring easy riches. Brett breaks it apart further by explaining the motivations for different traders: Practice and process are essential. He says, “You hear traders talk about finding your edge and sticking to your edge.” Finding your edge is a continual process because the markets are forever changing. You must adapt.

Brett goes on to discuss the importance of back-testing and how valuable it is to your strategy. He gives the example that elite performers spend more time in preparation than in performance. That preparation helps develop a strategy and prepare the performer mentally. It pushes the performer to develop the best of what they are doing. Brett then details the difference between repeated performance and deliberate practice.

Creativity is the next big topic discussed. Brett says it’s an individual’s creativity that breaks them away from the herd. A trader that has the creativity to diversify and test new strategies. Brett then touches on what it means to “trade your personality,” how paramount it is to have the right trading mentor, and the advantages of creating a checklist to bring out your best practices and make them routine. Lastly, Michael and Brett dig into the necessity of eating, sleeping, physical exercise, and yoga to help fuel a positive emotional experience in life and in trading. If you have been having trouble with the psychological aspects of your trading, this episode is for you.

In this episode of Trend Following Radio:

  • The emotional “buy in”
  • Checklists
  • Finding a smooth equity curve
  • Repeated performance vs. deliberate practice
  • The role of fitness and health in trading
  • The moment of now
  • Systems trading vs. discretionary trader
  • Relationship between volatility and volume
Nov 16, 2015

On today’s episode of Trend Following Radio Michael Covel talks critical thinking and behavioral finance. He begins with an article excerpt about locker room etiquette and loops around to the parallels between sports psychology and trading psychology. Michael argues that critical thinking has gone by the way side in the general populace and if you have an alternate way of thinking, one that is not with the masses, then you have a leg up.

Digging in Michael explores excerpts from a paper by Howard Marks titled, “Inspiration from the World of Sports.” The paper outlines the consistencies between sports and trading. Michael discusses bullet points from the article; 1. Trading and sports are competitive. Some succeed and some fail, and the distinction is clear. 2. In the long term the better returns go to superior investors. 3. An investment career can feel like a basketball or football game with an unlimited number of quarters.

Michael also explores from Howard Marks the career of Yogi Berra, his achievements and his baseball philosophy. Howard points out how consistent Yogi was in his performance and how that is exactly what he likes to see in his investing. Howard then compares Yogi Berra and Reggie Jackson (Reggie was far less consistent then Yogi). Howard says that he would rather have returns like Yogi, nice and consistent. Michael argues the case for trading like Reggie’s baseball performance. He says the Reggie Jackson home run model is more in line with venture capital, film financing, the MIT blackjack team, and trend following trading, for example. The point being that home runs will pay for the strike outs. Michael ends the podcast by pointing out that Reggie and Yogi are ultimately in the same game, but it is up to you to decide what style of trading you want.

In this episode of Trend Following Radio:

  • Consistency vs. the home run
  • Quarterly performance
  • Trend following performance
  • Emotion in human nature
  • Irrationality in investing
Nov 13, 2015

On today’s episode of Trend Following Radio Michael Covel interviews Jim Rickards. Jim was front and center during the 1998 LTCM blow-up. He was a partner and general counsel for Long Term Capital Management. Following their blowup, he was principal negotiator in the 1998 bailout of LTCM by the Federal Reserve. He has had a bird’s eye view of some of the most interesting events in the economy over the last 20 years.

Michael and Jim dive right into the sequence of events that lead to the devaluation of the Thai Baht in May of 1997. Jim then goes into the chronology of events that took place leading to the fall of Long Term Capital Management. He makes clear that LTCM had some of the brightest brains in finance working for them at the time, including Nobel Prize winners and a vast number of PhD’s from MIT, Harvard, Stanford, Yale, etc. Jim summarizes the events prompting Russia to default on their debt which let loose a sequence of events leading to LTCM losing four billion dollars in one month. Wall Street cared not for the four billion LTCM loss but because they had over 1 trillion dollars of derivatives contracts tied to LTCM positions. Many thought all of Wall Street would have been taken down if LTCM went down. That was when the Fed intervened and organized a bailout.

Jim goes on to talk about the changes that took place and the lessons that were learned from the fall of LTCM. He says the three lessons that should have been taken away from the crisis were; derivatives are dangerous, leverage is dangerous and getting banks involved is dangerous. The changes started with repealing Glass Steagall in 1999, rewriting laws so they could do “swaps” on everything, and then in 2006 the SEC changed leverage rules on brokers. So in short regulators ended up doing the complete opposite of what they should have learned from LTCM. Michael asks the question, “Why were the same people who were saying that the economy was great till the day it crashed, the same people that were responsible for fixing it?” Jim says policy makers never see bubbles. He gives two possible explanations for why policy makers act as they do; conspiracy or complete incompetence. He believes it is more incompetence rather than a conspiracy and goes on to explain why.

Michael and Jim then dive into “models”. If you have the wrong models you will get the wrong results every time. Michael notes that the right models are rooted in behavioral finance. Jim notes that the Fed does not use behavioral economics. Jim talks about the three elements that his model is based on: behavioral finance, complexity theory and inverse probability. He goes into great depth on what all of those models are and gives real life examples for them.

In this episode of Trend Following Radio:

  • 1997 devaluation of the Thai Baht
  • The collapse of Long Term Capital Management
  • The 2008 crisis
  • Complexity theory
  • Behavioral Finance
  • Inverse Probability
  • The Federal Reserve
  • Description of currency wars
Nov 9, 2015

On today’s episode of Trend Following Radio Michael Covel interviews Kathleen Eisenhardt. Kathleen is Co-Author of the best selling book “Simple Rules.” She is also the Co-Director of the Stanford Technology Ventures Program. Her book’s foundation is based on the argument that too much structure and too many rules don’t get products out the door and the other extreme, no rules or structure tend to not produce results either. In short, simplicity beats complexity. Her book “Simple Rules” is not just about rules in business, but in all aspects of life; sports, entertainment, investing, diets, etc.

Kathleen defines simple rules as shortcuts that save on time and are more commonly known as, “rules of thumb” (heuristics). Michael and Kathleen pull in examples from Google, Netflix, The White Stripes, Billy Bean and the Oakland A’s, General Motors, Stanford football and an expedition in the South Pole launched in 1912. Kathleen shows in all the scenarios how people who modeled the past failed and how the simple route conquered the complex every time. She stresses that the philosophy, psychology, and the system itself may not be so simple, but the rules to follow are.

Kathleen and Michael go on to discuss people who make a living out of of being complicated. Lawyers, accountants, lobbyists make a living out of having a lot of rules nobody can decipher. Kathleen discusses the differences in risk adverse people, more strategic people and the people who just go ahead and wing it in business and in life. Kathleen explains her three step process in creating simpler guidelines. “Bottleneck” is the 2nd rule in the three step process. The “Bottleneck” is what keeps you from getting to the objective. It’s what holds you up from moving forward. You solve the bottleneck and you have solved your problem.

In this episode of Trend Following Radio:

  •     Bottleneck concept
  •     Complexity is not always best
  •     Tax code for political gain
  •     Simplifying government
  •     Improving your probabilities with rules
  •     The Federal Reserve
Nov 6, 2015

On today’s episode of Trend Following Radio Michael Covel interviews Rob Walling. Rob may not be a trader, but he is a serial entrepreneur. And trading at its heart, after all, is an entrepreneurial activity. Rob started early. When he was eight his parents purchased an Apple computer and he learned to code to create video games, and when he got into college he realized coding could be profitable. He asked himself, “What can I do that I can leverage?” In the late 90’s he got his first paid job writing code for a consulting firm and around 2007/2008 he transitioned full time into creating and producing his own products.

Rob talks about learning from every job and every encounter. He speaks to real life experience and how it is paramount to success. Rob was passionate from the start about coding. He did it long before he thought it could be a paying gig. Michael and Rob also give examples of why you need to start at the beginning and figure out how to build your audience. If you are in your 20’s you especially need to realize that you don’t know everything. You are missing something. No matter how smart and motivated you are, you need that real life experience.

When trying to start your business Rob gives examples such as: pick a few people that resonate with you and focus in on them, only take the information you need at that point in time, and above all, stop shooting for the Zuckerberg “dream”. He sees so many businesses trying to be a “one hit wonder”. They aren’t thinking about building a business that is going to last. Rob has a straight forward approach to bootstrapping called the stair-step approach that he outlines on the podcast (as well as on his website).

In this episode of Trend Following Radio:

  • Rob Walling’s “Stair-Step Approach”
  • Growth hackers
  • The act of creating
  • Focusing on the “Unicorn” rather than reality
  • Filtering your information
  • Skin deep information
Nov 2, 2015

On today’s episode of Trend Following Radio Michael talks the timelessness of sticking with your system. Michael uses Jack Schwager and his books Market Wizards and The New Market Wizards as prime examples of timelessness. Although they were written years back, he argues they have not lost an ounce of value in today’s trading world. Michael harps on critics that say the Market Wizards books have no place in 2015 markets, noting that one of the great concepts introduced in Schwagers’ books was the notion of “systems”. Although the concept of having a system had been around for over 100 years, Schwager was one of the first to present and teach in an interview format.

Michael then segues into a clip with Howard Lindzon of Stock Twits. Howard further makes the point that having “Any system is better than no system”. He goes on to say, “You have to have a system to beat another system.” Howard talks about Jerry Parker, his trading style and why he has become so successful. Covel asks listeners, “What kind of system do you want? What are the risks and rewards? There are all kinds of systems out there. Have you done the work to find out the pros and cons? What kind of life do you want to have?” The system you choose will dictate that. People who tell you the Schwager books are dated are the same people that will sell you anything. These people go off of gut, intuition or even magical feelings, and that is their decision-making process. Trust that the highest achievers and money-makers on Wall Street trust their systems, painstakingly researched and developed. When times are good they leave it alone, and when times are bad they leave it alone.

Covel plays one last legacy excerpt from Bill Dunn. Dunn lays out that his approach is long term trend following and quantitative. His company does not override their signals ever and they have serious risk management programs in place. They have a 1% probability of losing 20% or more in a one month period. However, the client can choose more or less risk. He shows how his firm does not correlate with the S&P and their positions and trades are completely transparent to their clients. Dunn makes it clear that his performance is not a result of anyone’s judgment. It is a result of long tested simulations and models. Timelessness personified.

In this episode of Trend Following Radio:

  • Human nature doesn’t change
  • Timelessness
  • Behavioral finance
  • Sticking with a system
  • Risk management
  • Bill Dunn on trend following
Oct 30, 2015

On today’s episode of Trend Following Radio Michael Covel interviews Emil van Essen. Michael first heard of Emil from former turtle, Lucy Wyatt. The first thing to note is that he is not a trend following trader. He is a commodity spread trader. Emil has been a CTA since 1997, but his first trading experience was at the early age of 12. Emil delivered papers when he was younger and would take the money and invest in rare coins. The owner of the coin store happened to be a commodity trader. He helped teach Emil about trading commodities and even put in trades for him. Emil’s first trading job was in 1986 at the age of 21.

Michael and Emil start the podcast explaining spread trading. Emil describes trend following as one dimensional whereas spread trading in his view has a multidimensional trading surface because of all the directions a trade can profit rather than if the market only goes up or down. Emil refers to his trading as not systematic but model driven. At the base of his every trade is a model and they can tweak the model accordingly as they see fit–a big distinction compared to trend following.

Emil’s firm is one of the only CTA’s that are negatively correlated to trend followers. He also believes that following rules 100% of the time is a bad idea. “Our brains are far more smarter than computers,” he states. Emil adds, “We need to know not to be emotional about trades but if you don’t adapt to change then you won’t last.” Emil also throws around the controversial word, “prediction.” He says that when he says “predication”, it is actually more about “probability.” He tries to find a method that reliably tells him that something is going to happen more often than not. Emil says, “You try and find an edge. Find consistent behavior patterns that give you a risk adjusted return.”

In this episode of Trend Following Radio:

  • Growth of commodity ETFs
  • Diversification
  • Raising money vs. Making money
  • Quality Investors vs. Quantity of Investors
  • Beta and Alpha
  • Not all investors are created equal
Oct 26, 2015

On today’s episode of Trend Following Radio Michael talks about one of his favorite subjects: baseball and numbers. He profiles arguably one of baseball’s greatest managers, Earl Weaver of the Baltimore Orioles. Weaver believed that baseball, just like trend following, always came back to numbers. He knew the right formula was the 3-run home run.

Coincidentally, Covel’s favorite team growing up was the Orioles. They were one of the “it” team in the 1970s and early 1980’s. Unknown to most, Earl Weaver, the Orioles manager, had a strategy that was a foundation for the book (and later turned Hollywood movie) “Moneyball”. His approach to building a winning team not only applies to baseball, but also to many other aspects of life, including trend following.

Covel plays a clip about Weaver, profiling how he operated and changed the mentality of how to put together a baseball team. Focusing on every “out” was at the very core of his strategy. He looked at the whole arc of the game rather than just the beginning, middle or end. Weaver had a plan for every individual player on his team.

Weaver is just as responsible for Covel’s trend following mindset as some of the most successful trend following traders he has met. He showed that home runs win and pay for mistakes. Ask yourself: “How can I put myself in the position to capture the next home run?” That doesn’t mean to be reckless. The podcast ends with a classic Earl Weaver clip that throws a few “F” bombs around. Listener discretion is advised.

In this episode of Trend Following Radio:

  • Trend following as a numbers game
  • Earl Weaver’s Moneyball legacy
  • Why homeruns pay for the losses
  • Consistency as an illusion
  • Trading is/as a game
  • Know your strategy and stick with it
Oct 23, 2015

On today’s episode of Trend Following Radio Michael Covel interviews Charles Poliquin. Charles is recognized as one of the worlds most successful strength coaches and has coached Olympic to professional athletes. He speaks with Michael about his new venture with Ed Seykota as well as his vast health and exercise knowledge.

Poliquin was Canada’s second youngest black belt at the age of 14, has mastered 6 different martial arts, and is influenced strongly by Bruce Lee, karma and other eastern influences. After getting into karate at the age of 10, he moved into lifting weights at the age of 14 and fell in love instantly with the sport. He took on his first training client in his first year of college at the age of 17 and has named himself the “Strength Sensei ”.

Charles gives countless bits of advice on how to keep moving forward in life and fitness: “If you don’t have an expiration date then the goal doesn’t mean anything. There is no pressure.” Keep the competition going with yourself. Also, have a good balance of work and time off. He points out that sleep is one of the most underrated subjects within health and fitness, but it should be a priority. Lastly, Michael and Charles talk about testosterone levels and how they are deeply affecting men and women around the world. Charles explains both the environmental and nutritional basis for low testosterone and why it has such a huge impact on the human mental state.

“Progression not perfection is what you should be focusing on. “ --Charles Poliquin

“The general who sleeps the most wins the war.” --Charles Poliquin

In this episode of Trend Following Radio:

  • Long distance cardio vs. short sprint workouts
  • The importance of sleep to your health and fitness
  • Meditation and mindfulness
  • How testosterone levels affect the psychology of men and woman
  • Relationship between top athletes and top executives
  • How to stay motivated
Oct 19, 2015

On today’s episode of Trend Following Radio, Michael opens up about uncertainty and uses one of his favorite writers to illustrate: Christopher Hitchens. Hitchens is certain that he doesn’t know, and sees doubt and skepticism as our only path to enlightenment. He invites us to open up to the possibility that doubt will always be in front of faith–whatever that faith may be about. Covel sees Hitchens insights well beyond religion, and connects his comments to his trading world.

Next, Michael excerpts a recent soundbite from Jim Simons on Trend Following. He is one of the most successful traders ever. A great track record. 100% systematic. Uses price action. He is very clear that fundamental analysis is not his direction. How does Simons really trade? Will we ever know? No. Simons is tight lipped. Is Simons a trend follower? Does he use trend following at all? Worthy questions given his limited public statements. Covel digs into Simons recent comments about trend following asking the hard questions few are prepared to pose.

Lastly, Covel brings in Alan Watts to connect both Hitchens and Simons. Watts wonders why children have been forced into a learning process that doesn’t help them in the long run. He sees culture as leaving children at a disadvantage. He points out that the rules of the game are not given to children. Children are strung along. The powers that be keep key information away from the child, and even the adult, forcing them to always rely on the system. So while everyone is in desperate need of the future, ignoring the present moment is inevitable. Covel easily connects this to the markets and trading reminding us all that the gatekeepers are not your friends.

In this episode of Trend Following Radio:

  • Christopher Hitchens on certainty v. uncertainty
  • Jim Simons on Trend Following
  • Faith v. Skepticism
  • Is trend following dead?
  • Buying pleasure: a complete fallacy
  • Constraints on the truth
Oct 16, 2015

Today on Trend Following Radio Michael Covel has a conversation with Joey Yap, Feng Shui expert, founder of the Mastery Academy of Chinese Metaphysics and self-made entrepreneurial millionaire. Feng Shui, as Joey explains it, is “about how your environment supports you”. Further digging into the subject, Joey and Michael examine the world as a network of positive and negative energies.

After explaining some of the core principles of Feng Shui, Joey discuss how the practice has been “bastardized” by the West. Westerners believe it’s the items themselves that project energy – resulting in an entire trinket industry that has developed – when nothing could be further from the truth. The items exist merely for the energy to flow around because, as Joey explains, flow is everything.

Joey then goes on to discuss the myriad ways in which the tenets of Feng Shui apply to the business world. Think of a bustling office as a closed environment of continually crossing positive and negative energies. Collectively, this energy is called the “corporate culture.” But each individual environment is governed by a dominant energy, and that energy is determined by the company leaders. And, as you’d expect, an overall positive energy flowing throughout an environment will always produce better results. Many of the core principles seen in behavioral economics, trend following and Zen shine through in this episode, but from another perspective.

In this episode of Trend Following Radio:

  • Experts: get close to them and learn
  • You can’t predict the future, you can only see patterns
  • If you don’t like your destiny, go the other direction
  • Change your environment, change your life
  • Corporate culture: an energy determined by leaders
  • You don’t have to invent – fix something

Want a FREE Trend Follоwing DVD? Find it here

Oct 12, 2015

On today’s episode of Trend Following Radio, Michael Covel opens the conversation by taking a look at the concept of faith, and how it has no place in the trading world. In trading, logic and reason trump faith. If you can’t “grow” up and use reason to gather information and form strategy, Michael notes, then you have no place at the “adult” table.

Next, Michael outlines core decision-making precepts. Sometimes making the right move means going against your instincts, and it’s at these times that you need to force yourself to make a decision – even if it means quitting. People tend to equate quitting with failure when the truth, as Michael points out, is that sometimes quitting is what keeps you in the game. This line of thinking is again linked to logic rather than faith – the erroneous faith that if you necessarily stick it out (i.e. a losing trade in the markets) success will follow.

Other topics covered in this episode touch on how financial advisors primarily exist to push mutual funds and buy and hold orthodoxy, why investing without a plan dooms you before you begin, and why embracing the challenge of how the world and investing really works makes you a smarter investor.

In this episode of Trend Following Radio:

  • Logic over faith
  • Financial advisors: there to give mutual fund advice
  • Adapting your strategy
  • How quitting can keep you in the game
  • Forcing yourself to make decisions
  • Risk and reward

Want a FREE Trend Follоwing DVD? Find it here

Oct 9, 2015

Today on Trend Following Radio Michael Covel talks with author and startup entrepreneur Gabriel Weinberg about the concept of traction. Gabriel points out that in the business world traction is about far more than simply getting a grip and hanging in there – it’s about then moving forward, ultimately toward a defined goal (customers).

Just like a trend following trader that uses quantitative methods to invest scientifically, Gabriel relies on numbers and hard data to inform him about which marketing channels are working and which should be focused on, and which are less effective and should be dropped. The result is a streamlined marketing approach that’s allowed Gabriel, a self-published author, to sell upwards of 35,000 copies of his book.

Michael and Gabriel also talk about how psychology factors into startup entrepreneurship. For anyone investing their time and energy into a project, both passion and resiliency are paramount. If you aren’t passionate about the work you’re doing, and if you don’t genuinely enjoy the challenge of bringing a product to market, then you’re doomed before you ever start. Best, as Michael suggests, to run back to the office cubicle.

In this episode of Trend Following Radio:

  • Reaching your goal, then setting another
  • Resilience: vital to the entrepreneur
  • Committing to your idea
  • Psychology: the main barrier to success
  • Understanding that it’s okay to fail
  • Enjoy the challenge – or go do something else

Want a FREE Trend Follоwing DVD? Find it here

Oct 5, 2015

Today on Trend Following Radio, Michael Covel takes time out to highlight the fact that trend following isn’t simply about trading. From gamblers to pharmaceutical executives to those in the film and music industries, trend following is a strategy rooted in human nature itself.

As an example, Michael examines the success of film producer Jason Blum. In direct opposition to the Hollywood mantra of Spend! Spend! Spend!, Blum has chosen another path. Blum, recognizing that big budgets don’t necessarily mean big profits, developed a filmmaking system based on low budget projects. Blum fully understands that close to half of his films will flop. But he also understands that a handful of box office successes will more than cover those losses. This is the essence of trend following.

Michael goes on to quote from a 2005 article by best-selling author Michael Crichton. Crichton, talking about the then-burgeoning field of futurism, explains that these so-called futurists don’t actually know any more about the future than the average man on the street. These “experts” are guilty of the same flawed thinking that spews forth from the minds of traders who think they know what the market will do tomorrow.

In this episode of Trend Following Radio:

  • Why embracing uncertainty pays big
  • Trend following: it’s human nature
  • Losses: acceptable when you strategize to cover them
  • The sunk cost fallacy
  • Opening your mind to alternative ways of thinking
  • The mistake of blindly accepting the word of “authorities”

Want a FREE Trend Follwing DVD? Find it here.   

Oct 2, 2015

This time on Trend Following Radio, Michael Covel talks with Paul Slovic. Paul is president of Decision Research and a professor of psychology at the University of Oregon, and today he talks with Michael about the science behind risk perception.

To demonstrate how people tend to conflate actual risk with their perceptions of risk, Michael and Paul discuss a topic that’s always been a hot button issue in the public consciousness, nuclear power. In the early days of this industry, people were rightfully concerned with the possible mismanagement of such a potentially dangerous technology – concerns seemingly crystallized by the partial meltdown at Three Mile Island in 1979. Similar concerns continue to be raised today, particularly in light of the Fukushima disaster of 2011. But as Paul explains, neither of these tragedies can completely outweigh the obvious benefits of nuclear power. It’s a case of risk perception to overcome the actual risk posed.

The conversation also focuses on the role of the media in influencing people’s decision-making processes. Why is it, you might ask, that the media spends so much more time pushing negative stories than positive ones? The answer, according to Paul, goes back to biology. It’s a survival mechanism in human beings that we’re affected far more by negative stimuli than positive stimuli. This makes sense when you consider the external dangers we’ve faced in our evolution. So today, we tend to harp on the bad things that happen while ignoring the good.

In this episode of Trend Following Radio:

  • The psychometric paradigm of risk perception
  • Balancing risk vs. reward
  • The concept of affect heuristics
  • How the media sways the public’s risk assessment
  • Fast vs. slow thinking
  • Risk in the context of decision making

Want a FREE Trend Follоwing DVD? Find it here.

Sep 28, 2015

On today’s show, Michael Covel talks about decision-making, and how too often people allow the "rules" of others to dictate the actions they take. This, as Michael explains, is indicative of the politically correct culture that’s taken root in all of society.

What are we to think when wildly successful comedians such as Jerry Seinfeld, Louis C.K, and Chris Rock flat-out refuse to play college campuses because of the close-minded, irrationally sensitive nature of today’s student bodies? How have we arrived at a place where anything less than absolute conformity to preselected attitudes and beliefs means running the risk of being labeled "something"? Racist? Homophobic? Sexist? The list goes on.

What’s worse, as Michael points out, is that this culture of victim-hood has many feeling they’re entitled to certain things simply because they "exist". These are the people who blindly accept societal rules, rather than analyze and develop proper strategy. Good decision-making, whether in trading or everyday life, means developed a plan and a set of rules and then sticking to them. Because in the end, everyone gets what they want (to paraphrase trader Ed Seykota).

In this episode of Trend Following Radio:

  • Good decision-making through clarity
  • Examining identity politics
  • Operating under your own rules
  • Political correctness: it’s about agendas
  • Good trading means using your system and your mind
  • The importance of staying focused

Want a FREE Trend Follwing DVD? Find it here.   


Sep 25, 2015

Today on Trend Following Radio Michael Covel talks with Lawrence McMillan of McMillan Analysis Corporation. The topic of discussion is options, their value in terms of overall strategy, and how their trading has evolved over the preceding decades.

The conversation opens with Lawrence talking about his days at historic Bell Labs – a research company founded in the 19th century by Alexander Graham Bell – and the initial difficulty in working with options due to their complicated nature and the level of technology required. Later, Michael asks Lawrence to talk about the CBOE Volatility Index (VIX) and how, since the subprime crisis of 2008, many are looking at the VIX as long-term insurance for the future. One of the problems with that strategy, as Lawrence points out, is that many people fail to take into account that VIX only measures market expectations for the next 30 days.

Also discussed today are leverage as a financial tool and the concept of the black swan – unforeseen events that have a major impact, but only rationalized after the fact. Lawrence brings decades of experience and wisdom, gain perspective.

In this episode of Trend Following Radio:

  • American vs. European-style options
  • The logic behind VIX
  • Leverage as a tool
  • Understanding puts and calls
  • Long and short selling
  • Examining the subprime mortgage crisis of 2008

Want a FREE Trend Follwing DVD? Find it here.

Sep 21, 2015

On today’s show Michael Covel examines the duplicitous nature of the mainstream financial media, how its talking heads insist on pretending they can predict the future, and how even its most respected publications promote seemingly opposing ideas.

To emphasize his point, Michael opens the discussion by talking about the publication process for his first book, Trend Following. After being passed on by one publisher, he was eventually signed by the publishing side of the Financial Times conglomerate. The same FT, as Michael points out, that’s been trashing trend following for decades.

And nothing has changed. Michael reads from a September 2015 FT article in which author Stephen Foley gives trend following the traditional mainstream bashing we’ve come to except. But in the same issue, FT conducts an interview with Nobel Prize-winning economist Robert Shiller, in which Shiller says, he sees a massive stock market bubble – the kind of thing trend following has repeatedly proven to be best-equipped to handle.

In this episode of Trend Following Radio:

  • Trend following: a system, not a theory
  • Opinions are worthless without strategy
  • The mainstream media’s continued attacks on trend following
  • No one knows the future – embrace the idea
  • Theories are conjecture
  • Focus on the now – that’s the indicator

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Sep 18, 2015

On today’s show Michael Covel talks with memory expert and Memrise co-founder Ben Whately. Not surprisingly, central to the discussion is memory and how the human brain interprets and processes information.

When we think of fond memories, we often see events from someone else’s point of view. Ben explains that this is because in addition to our own personal recollections, we have also encountered alternate perspectives of the event through such devices as photos or home movies. Our brain mashes the imagery together and produces a composite image – a memory.

Michael and Ben talk about how humanity’s view on memory throughout time has always been a reflection of the best technology of the era. This leads to one of Ben’s favorite subjects, language. According to Ben, the way language is taught today – rote memorization – is completely wrong. Language is best learned by immersing yourself in the culture of the people who speak it. Take his memory lessons throughout this episode and apply them tomorrow.

In this episode of Trend Following Radio:

  • Memory, a composite of previously formed memories
  • How memories are encoded in the brain
  • To the brain, remembering equals imagining
  • How the most effective way to teach is to be entertaining
  • Technology, and how it affects our views on memory

Want a FREE Trend Follwing DVD? Find it here 

Sep 14, 2015

On today’s show, Michael Covel talks about how people that are ahead of the curve often find themselves isolated – even ridiculed – by those who don’t yet get it. This, as Michael points out, is certainly true for trend following traders, and some of the sharpest push back comes from the talking heads of the media.

To emphasize his point, Michael plays clips from an interview between CNBC’s Joe Kernen and Graham Capital’s Ken Tropin, a highly successful trader who heavily incorporates trend following techniques into his overall strategy. To Michael, of utmost significance in the two men’s exchange, is the fact that Kernen bumbles through the interview wholly unprepared (either via incompetence or on purpose). Kernen didn’t respect Tropin or his strategy enough to do even the most basic homework beforehand.

Michael’s discussion then moves on to the topic of uncertainty. In direct opposition to media personalities, that are paid to pretend to know what the market will do, trend following traders embrace the knowledge that they can’t predict the future. Uncertainty makes the game more exciting, and not just the investment game. As Michael demonstrates, the principles of trend following can be effectively applied across myriad disciplines.

In this episode of Trend Following Radio:


  • Recognizing that without a strategy, you’re at the mercy of the machine
  • Embracing uncertainty
  • Understanding that knowing every market move won’t help without a plan
  • The importance of setting your strategy beforehand
  • Seeing that media personalities are paid to pretend to know all
  • How the principles of trend following apply to other disciplines

Want a FREE Trend Follwing DVD? Find it here

Sep 11, 2015

Today’s guest is prolific author, mathematician and entrepreneur John Casti. John talks with Michael Covel about social mood, and how ultimately the events that urge populations to move in one direction or another are largely unpredictable.

John discusses the concept of socionomics – the idea that the collective beliefs of a society about its future will influence the kinds of social events to occur in that future. And while these triggers, which John refers to as X-events, can’t be predicted, John explains that they can absolutely be prepared for by understanding the greater social context of the region.

As an example, John cites the so-called Arab Spring. As he points out, no one could have predicted the single event that moved millions in the Arab World to take to the streets in protest. But it wasn’t hard to see that the region had long been primed for something big. Charles Faulkner recommended John as a guest (even though he only knew his work). Good tip from Charles!

In this episode of Trend Following Radio:

  • The fundamentals of socionomics
  • The science of surprise
  • Understanding that social mood is time-dependent
  • How X-events can trigger mood reversals
  • Isolating the collective social belief
  • The mindset of “the crowd”

Want a FREE Trend Following DVD?  Get it here

Sep 7, 2015

On today’s show Michael Covel vents some of the frustration he’s been feeling over the past few weeks. Central to his discussion is the idea of failure, and how the vast majority of people are unable – or unwilling – to accept how vital it is to overall long-term success.

Michael opens by pointing out that most people today seem to be under the delusion that someone will always be there to take care of them. This, as Michael explains, is by design. Government and the talking heads of the media want the average citizen to be soft, dependent, and unwilling to take risks. Safety and security, according to the official line, should be valued above all else (even if it is all an illusion).

But this line of thinking doesn’t account for the truly successful of the world. Those who’ve risked everything and succeeded – specifically because they failed and learned from their mistakes. Success requires tenacity and dedication, but neither are required if you don’t take a risk in the first place. Because if you never take a shot, you’ll never hit the target.

In this episode of Trend Following Radio:

  • Understanding that success requires failure
  • Seeing past investment myths
  • Recognizing that no risk means no profits
  • Understanding that there’s no such thing as a perfect strategy
  • Shattering the notion that someone will always take care of you
  • Accepting that there are no guarantees

Want a FREE Trend Follwing DVD? Find it here.

Sep 4, 2015

Today’s guest is author, entrepreneur and professional poker player Annie Duke. Michael Covel and Annie Duke discuss several of the countless ways in which the psychology of gambling overlaps with that of trading, investment and other aspects of business.

Annie explains the importance of thinking probabilistically for decision-makers. Gamblers, like investors, can sometimes become so focused on their losses that it begins to affect their decision-making process in a negative way. Annie calls this “tilt” and says it occurs when players put too much emphasis on outcome. She points out that so long as you are getting an overall return on your investment via a positive expectation, small losses should be both expected and absorbed.

Michael and Annie also discuss further in depth expectancy and how the top minds in both trading and gambling think about the long-term. When involved with risk, it is always important to think realistically. If there is a 90% chance of success, don’t round it up to 100% simply to boost your confidence. This way, if the venture fails, you won’t feel the need to discard your strategy since there was always that 10% chance of failure. Overall, your odds of success are still very good. This is why Annie’s thinking is so important for all of us.

In this episode of Trend Following Radio:

  • Focusing on the process instead of the outcome
  • Understanding that it’s about your return, not you winning percentage
  • Recognizing that in investing, consistency is unnatural
  • Thinking probabilistically
  • Maximizing your expectancy
  • Understanding that a loss doesn’t necessarily reflect bad thinking

Want a FREE Trend Following DVD?  Get it here.

Aug 31, 2015

Human beings have a strange habit of trusting other humans, even when the trust isn’t warranted. Everywhere in mainstream media, statistics are used and misused to convey an agenda. All too often, people ignore the agenda and buy into this engineered information.

To be successful, both in life and in trading, a person must move beyond this behavior. You need to be a skeptic. You can’t put blind faith into a system that doesn’t make its agenda clear. You probably shouldn’t trust it even if the agenda does seem clear. This is just as true when considering pollsters like Frank Luntz as it is when listening to the sales pitches of discretionary traders on Wall Street.

In today’s episode Michael Covel discusses the biases we have as human beings that lead us to poor investing decisions. Most notably, it is a bias that prevents us from trusting algorithmic trading, even when a human alternative is demonstrably worse. Through entertaining and insightful clips, Michael demonstrates why algorithms deserve our trust: their accountability and their ability to be back tested through different market conditions.

The episode is full of interesting sound clips and passages from bright minds such as Penn Jillette, Leda Braga, Daniel Dennett, Lasse Pedersen, and David Harding.

In this episode of Trend Following Radio:

  • The use and misuse of statistics
  • Using skepticism to your advantage
  • The advantages of algorithmic trading
  • Leda Braga on why ‘Black Box’ isn’t a fair term
  • Daniel Dennett’s simplifications of algorithms and computing
  • Trend following as simple agnostic rules that can easily be passed to a computer
  • Efficient market theory failure during surprises

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