Earlier this year, Michael Covel and his publisher, the FT Press, released an updated edition of the book Trend Following. I read the original book back in 2005 when I was working as Content Editor for Trade2Win and was preparing to interview Covel for an article on the site. For those not aware of it, Covel is also the author of The Complete TurtleTrader, which is a look at the history of the group of traders known as the “Turtles”, who employed a trend following strategy, so it all kind of comes together. This new edition expands the discussion to cover market events of the past couple years and adds one or two additional successful trend following money managers to the discussion.
Trend Following is a study of a trading philosophy. It actually reminds me quite a bit of books about philosophical movements in the way it presents the basic tenants and introduces the reader to a number of high profile practitioners. It explains the mindset of this type of trading, though the specific implementation is left for the reader to work through, just as in philosophy texts.
Some have compared Trend Following to the Market Wizards books, given the number of high profile traders and money managers profiled in it, a couple of whom (Richard Dennis and Ed Seykota) were in the original Wizard book too. I personally don’t think the two books are all that similar, however. Covel’s work is not a collection of interviews, though there certainly are plenty of quotes from those he profiled in the book (and many others), and of course his work is narrowly focused on one specific approach. Also, where the people were the main thrust of the Wizards books, they are actually only the supports for the main premise of Trend Following.
This is the type of book that in many ways gets a barbell type of review set. Those readers looking for specific strategies will not find them and will thus be disappointed. Readers seeking to understand what the trend following approach to trading is all about, however, will find the book extremely worthwhile. It does a great job of explaining all the ins and outs of this philosophy, outlining the benefits and addressing the criticisms. The book is full of statistics and visuals to help underscore the points being made, and the discussion is well done on many intellectual levels.
There is no doubt in my mind that anyone reading Trend Following with the right mindset (not looking for the holy grail) will come away with more than enough information to help them decide if the trend following approach is the one for them. The lack of specific trading techniques for trend following is of no issue to my mind given how easily one can find those types of strategies, or develop them for themselves.