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The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk (Wiley Trading)
 
 

The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk (Wiley Trading) [Kindle Edition]

Andrew Abraham , David Druz
3.7 out of 5 stars  See all reviews (3 customer reviews)

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Product Description

Product Description

A proven approach to trading success based on the best commodity trading advisors

Profiting from long-term trends is the most common path to success for traders. The challenge is recognizing the emergence of a trend and determining where to enter and exit the market. The Trend Following Bible shows individual traders and investors how to profit from this approach by trading like today's top commodity trading advisors.

In this book, author Andrew Abraham stresses the importance of a disciplined, consistent methodology, with stringent risk controls, that allows you to catch big trends, while limiting losses on unprofitable trades. By trading in this manner, he shows you how to successfully achieve market-beating returns over the long term and multiple your trading capital along the way.

  • Reveals exactly how top commodity trading advisors operate and how individuals can incorporate these methods into their everyday trading endeavors
  • Addresses key issues like position sizing and risk control, which are critical to trading success, but often underemphasized in other trading literature
  • Highlights how to effectively execute the trading strategies outlined

Engaging and accessible, The Trend Following Bible will put you in a better position to profit as you make more informed trading decisions.

From the Inside Flap

There is no easy way to make money in today's markets. If you're looking for get-rich-quick advice or the holy grail of trading, the only thing you're really doing is wasting time and money. In order to truly excel at this difficult endeavor, you have to work hard, stay focused, and follow a method that will put the odds of success in your favor. Nobody knows this better than author Andrew Abraham—a commodity trading advisor with over eighteen years of experience using trend following techniques to compound wealth and manage risk. And now, in The Trend Following Bible, he shares valuable insights, from the perspective of a professional who trades for a living, of what you need to know and internalize to become a consistent and successful trend trader over time. Written with the serious trader in mind, this unique guide skillfully puts trend trading in perspective. It discusses the development of a robust trading plan, which is applicable to all time frames and markets, details how to manage the inherent risks of trading, and reveals how important patience and discipline are in order to see your plan through. Along the way, Abraham explains the psychology behind successful trend trading, provides practical examples of traders who have applied it, and addresses the underlying principles you'll need to know in order to make this approach work for you—from trading the best markets, betting small, and using stop-losses to trading with the trend, cutting losses, and avoiding overtrading. Trend trading is a journey filled with ups and downs. But by taking the ideas found here, and applying them to your own personality and risk tolerance, you'll discover what it really takes to capture trends and make money with them in the long run.

Product details

  • Format: Kindle Edition
  • File Size: 25858 KB
  • Print Length: 225 pages
  • Page Numbers Source ISBN: 1118407741
  • Publisher: Wiley; 1 edition (29 Nov 2012)
  • Sold by: Amazon Media EU S.à r.l.
  • Language: English
  • ASIN: B00AJ3J4TG
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Enabled
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (3 customer reviews)
  • Amazon Bestsellers Rank: #288,655 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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More About the Author

The Bible of Trend Following - How Professional Traders Compound Wealth and Manage the Risks
Wiley Books
The Bible of Trend Following Foreword

I've been trading for investors for over 30 years. My first fund, Tactical Commodity Fund started in mid-1981. Tactical's current program began in 1993 as an offshoot of that first fund but with lower leverage and some evolutionary changes. I've learned a lot over the years. I've seen a lot of markets, a lot of bull moves, a lot of bear moves. And I can tell you I wish I had read this book 30 years ago. I would have made more money, especially near the beginning. Do yourself a favor. Read it. Now.

My trading-for-investors career began not long after gold peaked around 870 and a bit over a year before the S&P bottomed near 100. I subsequently watched gold drop more than 70% over 19 years and then rally over 700% in the next 12. I watched the stock market rally for over 17 years with just one big, brief pullback along the way only to witness two retracements greater than 50% in the next 10 years.

I've seen almost too numerous to remember booms and busts in the commodity, currency and interest rate markets. I've seen things happen that everyone said never would and watched as things didn't happen that everyone said were inevitable. I've traded and held positions in these markets nearly every single day since mid-1981.

Tactical was one of the first systematic, computerized fund managers. We started out on a Radio Shack TRS 80, before the first Apple. Historical data that costs pennies now took months to type in by hand. We ran Fourier transforms and proved there were in fact no repeatable hidden cycles in the markets while everyone else was still talking about them. We tested all the market lore to see what was true and what wasn't. We tested the early mechanical systems that were touted and found most of them didn't hold up. Indicators that people still use today we learned years ago don't really give you a statistical advantage.

I wrote my own back testing software and tested everything I could think of. When personal computers advanced we bought the latest. For a number of years we had two Sun workstations running 24/7 doing systems testing when those were state of the art. Of course now you can do the same things much faster on a laptop. But that was then and this is now. We kept testing. We kept learning.

I read every book I could get my hands on about trading. I listened to the old traders. When I worked during summer breaks in college at a brokerage firm at the Chicago Board of Trade I kept my ears open as the old timers related their adventures, their successes, their failures. I tried to understand the psychology of the winners and how it differed from the losers. I got the idea that the psychology of the trader was as important if not more important than anything in success or failure.

I spent a lot of time learning things the hard way, a lot of trial and error, a lot of hard knocks. Trading is still a lot of hard knocks. Drawdowns can go on seemingly forever. You can have days, weeks, even months on end without much in the way of profits. It can feel like you are a punching bag or a movie double who takes all the hits. But that's the nature of the game, of the business.

Even after you've learned how to do it, you still take your hits. To succeed you just need to stand up every time you get knocked down. You need to have the confidence that standing up is the right thing to do. You need to know when to stand back up and how. And just by standing up again and again and staying standing as long as you can before you get hit again, well, you can actually make more money than you lose over the long run in trend trading. It's quite the amazing process.

Very few people succeed in this process. The learning curve is too steep and the correct psychology is too hard to implement. If you have any attachment to making money, and who doesn't, it is very tough to trade correctly.

This brings me to the book you hold in your hands. To reiterate: I surely wish I had it 30 years ago. It would have saved me a lot of work. And I would have made more money, especially in the early years. More specifically I would have lost less money and that would have put me farther ahead today. Andy Abraham has written a gem. His writing style is enjoyable, clear and entertaining. He covers all the main ingredients needed for successful trend trading. He tells the truth.

What impresses me most about Andy's writing is his honesty. He doesn't sugar coat things. He doesn't tell you it's easy to make money. He tells you that you need patience and discipline. (By the way "Patience and Discipline" has been Tactical's slogan since its inception.) Andy tells you drawdowns and losses are part of the business. He presents a track record of one of his own programs that he started just a few years ago that has not made new highs in 17 months. That's exactly how it works sometimes. What is so refreshing is Andy's honesty about it. The man has integrity.

A characteristic of those traders who have been successful over many years is honesty with respect to their trading. You need to understand your own psychology, where you are mentally strong and weak, how you deal with baser emotions, particularly fear and greed. If you lack honesty with yourself you will almost certainly fail. Andy's honesty, more than anything, tells me he understands trading psychology and gives me confidence he is qualified to teach others what he knows. I have yet to run across a trading book that emphasizes the psychological aspect of trading better than this one.

This book is not a cookbook. It does not outline a mechanical system. It explains the psychology needed to succeed in trend trading, gives some examples of traders who have applied it and sets out the underlying principles which should be followed for success-- trade the best markets, trade with the trend, bet small, use stop losses, cut losses, ride winners, don't overtrade, be patient, be disciplined.

As a bonus, Andy gives you the scaffolding for a particular methodology that works for him as an example of everything he sets out in the basic rules. Just as you would never think of moving into a new house that has been framed but before the roof, walls and interior are finished you cannot and should not attempt to trade Andy's "system" without doing all the finishing carpentry. You need to do your own back testing--doable these days with off the shelf software he describes--to fill in the parameter values and to learn how his trade-the-best market portfolio ranker shuffles which market signals you take. For those who don't have a clue where to begin Andy gives you his exact pattern to follow. Your own back testing fills in the parameter blanks.

Andy advises everyone that they must trade a style that fits their personality. I believe very strongly he is absolutely correct. You will not follow a system that does not suit you. In his wisdom Andy thus does not give you all the parameter values for the formulas in his personal trading scaffold. He wants you to do your own back testing, to find a methodology that you are comfortable with yourself and have confidence in. When all is said and done your approach may be identical to his with your own parameter values. It may be significantly different. Regardless, you cannot develop the confidence to pull the trigger after multiple losses in a row without having done the work yourself. Guaranteed.

It's a fair bet to say that any trend following methodology likely to succeed over time will employ the general psychological and fundamental trading rules Andy outlines. The specifics of everyone's approach will vary, but the broad principles outlined here will be present in one form or another in virtually all robustly successful trend following approaches. People say that markets have changed and new rules are needed for the new game. I've heard that for over 30 years. The markets do change but the underlying fundamental rules for success don't seem to. They are all outlined here. How great.

You are lucky to have picked up this book. If you are a seasoned trader, reviewing the basic elements of winning psychology makes this book worth perusing cover to cover. We can all use reminders, yours truly always. If you are new to trading this book can save you years of trial and error and monetary losses. This book is now on my short list of recommended reading material for traders. I sincerely thank Andy for having written it. Have fun reading it. I wish you all the best in your trading.

Dave Druz
Tactical Investment Management
CTA / CPO since 1981
Haleiwa, Hawaii
April 2012
Bio

I have been investing in commodities,hedge funds, real estate, debt instruments and managed futures since 1994. My goal has been to compound money over time. I am a trend follower. I do not predict but rather make myself available when trends appear. I have built trend following programs as well as allocated to commodity trading advisors & money managers who think the way I do as far as risk. I have seen what it takes to be consistent, successful & able to compound money over time by emulating successful traders and investing with long time money managers & commodity trading advisors. I know what has the potential to work over time & more so the pitfalls to avoid. Investing with others as well as our own trading has enabled me to compound my net worth and is a lifetime strategy. My trend following programs have been an evolution of seeing virtually every mistake possible and building a model that mitigates these mistakes. I look at over 80+ liquid markets and look to buy the strongest markets and sell the weakest. Multiple systems with a stringent focus on risk assists us in our goal of compounding money. There is no Holy Grail or magical system. It is rather a robust idea that can trade all markets and time frames the same based on heavy risk management & most importantly a proper mindset common in successful trend followers.I am a trend follower with a strong focus on risk. I don't just focus on the returns I focus on how much risk is taken to achieve those returns. In order to smooth out returns I also invest with various commodity trading advisors. I have been investing in Commodity trading advisers, hedge funds ,real estate, debt instruments since 1994. Was prior a Registered Investment Advisor & a NFL players financial advisor specializing in value investing tenents based on Benjamin Graham as well as hedge funds and fund of funds. My premise is to maintain wealth and compound money over long periods of time. Trend following offers the transparency and liquidity & has become a life long strategy.

There is no Holy Grail or magical system. It is rather a robust idea that can trade all markets and time frames the same based on heavy risk management & most importantly a proper mindset common in successful trend followers. My passion is researching & testing trading systems. I am blessed to have an outstanding programmer with over 25 years experience on my team. My goal is to have world class trading systems that my family can invest in.

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Customer Reviews

3.7 out of 5 stars
3.7 out of 5 stars
Most Helpful Customer Reviews
2.0 out of 5 stars Really too repetitive 19 Jan 2014
By Bruno
Format:Hardcover|Verified Purchase
I found three ou four ideas that helped improve my trading. Other than this, it was really boring reading this book. The author is always repeating himself. The book could be resumed to 15 to 20 pages.
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4.0 out of 5 stars Good book but repetitive 4 Feb 2013
Format:Kindle Edition|Verified Purchase
For trend followers this is a good book to buy, it gives good advice but is more concerned with the psycology of trading and he tends to repeat himself. Could have been written as a shorter text.
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1 of 3 people found the following review helpful
5.0 out of 5 stars Trend Following works 10 Dec 2012
Format:Kindle Edition
Just wanted to say that although we have only spoken a few times by
Skype & Email, you have been a tremendous help in keeping my trading
moving in the right direction. Your blog posts & the videos which you
broadcast are invaluable. You talk about concepts which most others do
not. By taking a cold hard look at risk in the face and by taking in
all that you preach, you have inspired a few Aha! moments for me.
Consequently my trading results have increased and I
can assure you that this is no coincidence.

Thank you for continuing to share your wisdom with the trading community
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Most Helpful Customer Reviews on Amazon.com (beta)
Amazon.com: 4.0 out of 5 stars  30 reviews
21 of 26 people found the following review helpful
3.0 out of 5 stars Achieved Its Goal, Fell Short in Some Areas 23 Jan 2013
By Scott's Investments - Published on Amazon.com
Format:Hardcover
Andrew Abraham is a commodity trading advisor who has traded professionally for 18 years. He specializes in trend following strategies and recently published The Trend Following Bible.

The author profiles successful traders and warns of false messiahs and "geniuses" in the early part of the book. Abraham clearly states the objective of the book (always the first thing I look for!), but does not do so until page 79, which makes the "introduction" lengthy and repetitive. He promises to show readers how to have an exact trading plan, how to take low risk bets, how to take losses, how to allow profits to run, and how to develop the proper mindset of a trader. These are worthwhile topics and in short I believe he achieved those objectives despite some of the other shortcomings of the book.

His trading plan begins with a discussion of risk and capital management. He then shows how he identifies trending markets, including his use of Rate-of-Change (ROC) and MACD. He then shows precisely where he places his hard stops and trailing stops and how he takes profits.

Abraham's objective was not to sell his exact trading system to his audience, but rather his process. He encourages readers to create a system which fits his or her personality. As he states "strategies do not make good traders". He also notes that the tenets of trend following are simple and intuitive but in practice difficult to apply due to our own fear and greed.

Abraham repeats many trading psychology tips and tricks in an effort to help develop the proper mindset of a trader. While he repeats many of the same slogans pertaining to discipline and patience, they are worth repeating because they are so crucial to long-term trading success. Two notable points he emphasizes are accepting small losses and having and sticking to a trading plan. More experienced traders could be turned off by Abraham's repetition, but for new or aspiring traders this repetition has value.

The author concludes the book with a trade diary that is helpful for those new to trading. Abraham chronicles his trades from 2009-2011 with a detailed description of many of the trades. These descriptions became a bit repetitive, but for those new to trading it serves as a primer for what to expect as a "trend trader".

The book was not well edited, with several mistakes that should have been easily caught in the editorial process. I also felt like Abraham had some solid ideas, but since he admittedly is a trader first and author second, there should have been better organization and layout to the chapters. The editor and publisher failed in this regard. The title of the book also over-promises. I would not classify this as a "bible" or must-read, although it does emphasize several enduring qualities of many successful traders.

Abraham also runs a web site Trend Following Mentor and mentions it briefly in the book, but unlike many other books I have read in recent years there are not the perpetual referrals by the author to his website or material or charts on his site, which was a welcome change.

In short, Abraham does a good job of emphasizing discipline and patience. He achieves his stated goal of the book and provides insight into his precise trading strategy. The book falls short in its prose and editing and much of the book is repetitive and disjointed at times. If you can look beyond some of these shortcomings, it is still a decent read, especially for those new to trading or to trend-following.
2 of 2 people found the following review helpful
3.0 out of 5 stars Some good trading gems but needs better editing 28 Dec 2013
By Michael E. Strupp - Published on Amazon.com
Format:Hardcover|Verified Purchase
I have a lot of respect for Andrew Abraham as a veteran trader who is passionate about the markets, has talked to lots of traders, and is willing to share the hard-earned insights he has gained through years and years of trying to grinding out profits in the market. His dedication to sharing his craft is admirable and commendable.

You will find a some really good trading gems in this book, and some well-deserved discussions regarding how hard it is to trade and make money year in and year out. I wish more trading books placed such emphasis on the "realities" of trading. As Andrew points out, if you're new to the markets and expect to make 50% to 100% per year using someone else's "trading robot", you are deluding yourself. Trading is a tough and ugly business, by far the hardest "easy money" you will ever make. The chapter on "The Trend Follower Mindset" was especially good - anyone who wants to trade systematically should read this chapter and take it to heart. In fact, you should probably read that chapter twice.

My sole disappointment with this book is just how poorly it is edited. I don't know if the responsibility for this rests on the writer, or the publisher (or more likely, a combination of both), but at points it feels like the author is rambling, almost to the point of incoherence.

Let me give you one example: in Chapters 7 and 8 ("trend breakouts" and "trend retracements"), the author spells out pretty clearly his methodology for trend trading the markets. He lays out his rules and he provides examples for how he trades. However, in Chapter 9 ("The trend following mindset"), on page 138, he writes: "My goal is to enlighten you and teach you what it took decades to learn. You will learn to have an exact plan with exact entries, exact exits with both profits and losses and exact quantities to buy and sell."

But wait, isn't that what you just did in chapters 7 and 8? Why are you writing that you "will" do something when you just did it?

Unfortunately, it feels almost as if this book was cobbled together from a series of independent blog posts or other coaching materials but no effort or thought was put into how the material all flows together. Instead the author seems to bounce around from subject to subject like a manic pinball. As others have noted, certain ideas are repeated over and over again, and at other points, the logic and flow of the text falls apart.

Like I said before, there are good trading ideas in this book but you have to wade through a lot of poorly-edited text to get to them. It's a shame, because it's uncommon for a veteran trader to be willing to share their experience so readily with the public and I think everyone (especially new traders) can benefit from that.
2 of 2 people found the following review helpful
5.0 out of 5 stars For Serious Trend Traders looking to make serious money with a plan and discipline 19 Oct 2013
By Andrew Jenkins - Published on Amazon.com
Format:Hardcover|Verified Purchase
I rated this 5 stars because I am someone that is looking to seriously create a trading plan to get a consistent return of my trading over time using a trend following methodology. Andrew Abraham delivered an out of box trading method that he has used to generate returns for himself over 18 years. Using a combination of Andrew's methods mixed with the understanding of some market psychology and discipline found within yourself can actually work! I liked this book because it reinforces the trading methods I was introduced to through Michael Covel's books which I highly recommend and I was searching for more like minded traders and read Andrew's book who actually recommended Covel in this book.

Trend Following Bible is about 200 pages worth of information with what sort of mindset/psychological makeup you should have as a trader, proving the successes of others over long periods of time with compounding returns, his trading method, and guides you along your path. From my experience reading there is no book out there that is a "holy grail" that just by simply reading will show you how to "win" at trading, but this one comes pretty close.

If you are not wanting to put in any time in doing your own research and using your knowledge learned to develop your own rules and stick with them then this book is not for you. This book is guidance for people that are serious about trading and will help your learning curve. If you are looking for trading tips to get rich fast then you would be better off to not start trading at all.

I highly recommend this book to any person that is serious about trading and wants to compound wealth over a course of years using any time frame of trades whether its day trading or long term trend following, this book can help you along your path. I would recommend going to a compound interest calculator and put in compounding at about 15% with whatever capital you have available to invest and put in per month and see how long it takes you to make your first 2 million. The first 2 million is always the hardest, but this book can help you get there!
1 of 1 people found the following review helpful
4.0 out of 5 stars Good book but I have a few things to say 11 Feb 2014
By slowmothe1st - Published on Amazon.com
Format:Hardcover
A good effort to show the essentials of trend following, highly recommended for anyone interested in this technique.

But then within the spectrum of trend followers, the author is very risk averse, to the point that there are layers of safeguards to minimize risk that seem irrational and unnecessary, such as the 10 longs and 10 shorts, or the 20 percent total open profits, they seem to be there just to provide an extra sense of security, but serve no purpose other than that.

Then again the author is very well-intentioned, the knowledge and experience the author shared is well worth the price, any trend follower should use it as a starting point to further develop the approach that suits him/her best.
5 of 7 people found the following review helpful
1.0 out of 5 stars Worst trending following I've already read 11 April 2014
By E. A. Costa - Published on Amazon.com
Format:Hardcover
The first third of the book is only about saying how trend following is good and trading is hard. A totally waste of paper and time. After the author presents the technique. He wrote that we should keep it simple but he doesn't. He presents nothing new, but just a collection of other people's ideas. Definitely go to others sources. This isn't good.
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