Rating: - Excellent introduction
Covel's book is a fine introduction to trend following. I was always curious about this style of trading since I read Market Wizards, and this book answers a lot of questions about the basic methodologies, and convinced me that using a simple, disciplined trend following system on as many markets as I was interested in trading was the way to go.

Yes, it's true that market's spend less time trending than not. That's not a reason to not use trend following. First, you can trade multiple markets, and the chances are good that one or more of them will be trending when the others aren't. But, even if you trade one market exclusively, trend following will keep you in the trends when they're occuring so you'll be able to be trading in the correct direction and not get yourself seriously hurt.

Where the book is weak is in giving instruction in how to actually put together a system. It would have been helpful to at least discuss Donchian's methods in enough detail that a trader could actually use them as a starting point. As such, I had to search all over the internet to get the details I was looking for.

Another qualm I have is that many of these traders who did very well were managing other people's money, and taking a cut. That's very different than somebody starting out with their own capital and trading it exclusively. For example, Henry and Dennis wound up making upwards of several hundred million dollars over their careers, but started with a few thousand dollars or even less of their own money. Eventually they traded for customers. Had they not done so, it is far less likely that they'd have become as rich as they did.

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Rating: - Solid Treatise on Trend Following
Consistently making money in the markets is every trader's dream. Unfortunately, most traders fail because they lack a fully tested trading plan, they are negatively influenced by their emotions, and they lack the key personality traits. For those individuals looking for a reliable method to trade the markets, Covel offers a comprehensive guide to trend trading that is informative, practical, and that can be implemented using simple technical tools.

Trend trading seeks to capture the majority of an up trend or down trend in the major asset classes - equities, bonds, commodities and currencies. Since no one can predict future trends, one must wait until a trend become a matter of record. Trend followers use only price (open, high, low, close) as the determinate of the trend, without regard to the accompanying volume.

According to Covel, he wrote the book to unmask very successful, reclusive and low-key trend followers - how they think, how they trade, and what can be learned from them. Firstly, trend followers are traders not investors. Secondly, their goal is to make money not buy-and-hold. Trend following continues to be a successful trading strategy because markets behave in similar ways as they did 300 years ago. Trend trading is a disciplined objective approach based on specific rules. There is no discretion used in making trading decisions.

Trend followers do not guess, if they must buy or sell. They know what to do because they have a pre-established plan. They are basically technical traders that base their buy and sell decisions on price movement. They react rather than to try to predict the market direction. Covel pinpoints three methods to determine the trend, including moving averages (crossovers), Donchian Channels (high/low breakouts), and Bollinger Bands (standard deviation breakouts).

Covel provides a peak through the door of highly successful trend traders who are not well known, but have amassed fortunes using their trading techniques. The book is aimed at traders who want to trade their own account or who want to hire a trader to manage their money. This expanded edition of the original book provides additional resources illustrating the positive results attainable using specific trading strategies.

One 60-page chapter is devoted to profiling the personalities, insights, and performance of ten outstanding trend followers with long-term track records. They all have different approaches and systems, but they are all exceptional traders in both up and down markets. These traders know themselves very well, and they've been able to separate their emotions from their trading decisions, thereby being able to develop trading systems they are the most comfortable. Another chapter focuses on the performance data of 23 trend following traders including their absolute annualized and compounded returns from January 1993 through June 2003. Moreover, there is a penetrating discussion of volatility, drawdowns, and performance correlation among traders. Interestingly, the trend followers usually track the same markets at the same time.

Covel covers the trend followers' performance during big events (Long-Term Capital Management fiasco in 1998, September 11, 2001 terrorist attack, and the 1999-2002 stock market bubble) to show how successful they were during these difficult times. Even though these events were unpredictable, the trend followers were usually on the right side of trend.
Additional perceptive chapters reflect on a comparison of the similarities of baseball and trend following, and how human behavior impacts trading decisions and trading success. Another chapter discusses the improbability of finding the `holy grail'.

Covel also provides supplementary appendices showing detailed 15-year back-tested results using three trend tracking methods previously mentioned, using 20 different futures markets including currencies, commodities, and financials. Detailed performance results are provided including complete trading statistics (long only, short only, and long and short combined), portfolio equity and drawdown curves. For each strategy, Covel delineates the specific buy and sell rules and position sizing.

Another appendix provides the performance of 23 trend following firms for at least 10 years, including yearly and monthly performance, and line charts of performance and asset growth. One appendix includes an explanation of the personality traits of successful traders that was written by Brett Steenbarger, author of Psychology of Trading. And another appendix provides fourteen questions a trader should ask about his chosen trading system.

The book is peppered with over 100 quotes of traders and others that further enhance the tenets detailed. In addition, there is an extensive bibliography and footnotes. In summary, Covel provides a comprehensive review of time-tested non-emotional trend following strategies of the masters, and backs them up with extensive performance data. Technicians, and new and experienced traders will find this book to be well worth their time. This is one of the most exceptional books on trading that I've come across, and I highly recommend it. I will need to re-read again to absorb the wisdom provided.

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Rating: - The Purpose is Knowing Where to Look
I should give a disclaimer that I am quoted in this book a few times. That does not bias me however. Covel has made it his mission to increase the exposure of trend-following as a trading methodology.

Trend-following, quantitative/systematic trading, and the futures markets are typically underallocated, underexposed, and neglected corners of the investment world. Fundamental traders continue to trash "black-boxes" while selling their "crystal balls". The concept they miss is I would much rather have logic AND historical analysis supporting my trading than simply logic alone.

The point of the book is demonstrating that trend-following makes logical sense and has a decades long proven track record by the top traders in the field. It will not teach you how to trade. It will simply point you in the right direction. From my experience, though, knowing where to look is the most important step.

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Rating: - One Big Idea
There are two kinds of finance books. The ones written by traders, and the ones written by finance writers. Books written by traders are steeped in experience, but often badly put together. The ones written by finance writers are sleek and professional looking, but lack the realism of people who have been battle hardened by hundreds of trades.

This is one of the latter. The writer has gotten hold of one idea, "Trend Following", and beats it to death. The problem that he goes well beyond his brief.

For instance, he claims that Jesse Livermore was a trend follower. Nothing could be farther from the truth. Livermore was a momentum trader. His motto was "no stock is too high to buy, or too low to short". Livermore loved breakouts, and didn't limit his trades to the middle of the move.

What is more, the writer lets Ed Seykota get away with his Dr. Seuss witticisms, without having him divulge any of his trading methods. There is nothing new to that, because the same thing happened in The Market Wizards. However, it is not exactly informative.

Without trying to sound like Ed Seykota, trend following only works when there is a trend to follow. Unfortunately, 80% of the time, markets move sideways.

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Rating: - Reinterating the obvious...
This book is another pie-in-the-sky book. Technical analysis is not the end all to investing in markets. Sure, the author has empirical data but...so what. He fails to mention the enormous DD's one has to endure in order to make money. It is proven that mechanical trading systems do not hold their weight in gold. By and by, they become obosolete because... they were curtailed to a selective time frame that no longer supports their viablilty in the wake of present time. Relying solely on mechanical trading systems that are derivatives of technical analysis is futile to longevity investing in the markets unless you have a lot of money you can use to weather the storm with. This strategy is best suitable for CTA's and hedge funds...people who have the money to put up and stay in the game with... if the situation gets kind of murky.