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The Little Book of Trading: Trend Following Strategy for Big Winnings (Little Books. Big Profits) Hardcover – 26 Aug 2011
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The Little Book of Trading reveals the secrets from trend–following insiders giving you the freedom to trade all markets: interest rates, copper, currencies, stocks –– you name it! Covel encourages you to take that TV blaring CNBC and throw it right out the window. Charts cut the noise.
Addison Wiggin, Best–selling author of Demise of the Dollar; Executive Publisher, Agora Financial, LLC
In The Little Book of Trading, Michael Covel has collected many gems of wisdom from some of the great traders of our time. After reading this book and piecing together all of the commonalities therein, you ll begin to understand what it takes to be successful in the markets. Ignore these key truths and one day you ll watch your account disappear.
Van K. Tharp, Ph.D., President, The Van Tharp Institute.
Michael Covel s unique insight into trading is invaluable. Both novice and experienced traders can benefit from Michael s thorough knowledge of markets around the globe. The Little Book of Trading is a must read for serious investors.
Louis G. Navellier, Chairman and Founder, Navellier & Associates, Inc.
Imagine being in the circle of trust of some of the greatest traders of all time, knowing what made them successful and having them share heartfelt advice. Though the eyes of Michael Covel in The Little Book of Trading, you will truly feel this experience.
Murray A. Ruggiero Jr., Contributing Editor, Futures Magazine; VP Research and Development, TradersStudio Inc.
Michael Covel s Little Book of Trading is a must–read guide to help you succeed in the shark–infested waters of the investment world.
From the Forward, Cullen O. Roche, Founder and CEO, Orsus Investments, LLC; Proprietor of Pragmatic Capitalism
The latest addition to the little book big profits series, Michael W. Covel s The Little Book of Trading: Trend Following Strategy for Big Winnings looks at the financial world through the eyes of successful trend traders What Covel stresses throughout the book are the accompanying principles that make trend following viable: stick to your plan and manage your risk through diversification, stop placement, and position sizing. These are important principles for any kind of trading, but for trend following they are critical Successful trend following traders try to capture the outliers, the really big moves that more than compensate for the many small losses they take. This goal requires traders to have confidence in their systems and confidence in themselves. By introducing the reader to successful trend traders, Covel believes that some of their magic just might rub off.
From the Author
1. What is trend trading?
Trend following is a very straightforward trading strategy that ignores fundamental information to buy and sell all markets. For example, pretend you have no idea what way a market will go or for how long. Trend followers simply say that if Apple is trading at price level 300 and it starts to go higher -- buy Apple. Why would you do this? If Apple is going up you want to be on board. Period. No one knows how high or low Apple may go, but if it goes from 300 to 400 you don’t want to miss out -- even if 300 feels like too high of a price to buy in at. Buying low or cheap is not the goal. After you buy, if it goes the other way and you start to lose money – you get out. How do you know to get out? Trend followers abide by certain universal and timeless rules that go back 100 years. If you lose a small amount of money due to the trend does not going your way, you get out. The key to keeping that loss as small as possible is admitting defeat. That is how you preserve capital while waiting for the next big unpredictable trend to arrive to make you money.
2. Why do you recommend a trend following strategy over a more traditional form of trading?
Here is the great thing about trend following: you do not need to be knowledgeable of the fundamentals that a stock or a commodity consists of to make money from them. You do not need to know how great the demand will be for the next iPad. You do not need to know how far gold will go up, or down, or why. That information is irrelevant. The only variable necessary to understand, so you can make money, is which way the market is trending and if you are on board, up or down, in that direction. This puts you on a much more even playing field with banks and hedge funds, who clearly have more fundamental insight than you could even dream of amassing. Also, unlike mutual funds, trading trends for wealth building means you can make money when the market goes up or the market goes down. This is a huge advantageous distinction from most other strategies being used in the markets.
3. Who can benefit from reading The Little Book of Trading?
Any individual, regardless of whether they are currently trading or not. The Little Book of Trading is for those who are open and willing to learn a different, less conventional way of making money. It is for those who are curious how some of the top traders are profitably thriving during these uncertain times. It is a road map for an uncertain future.
4. During the course of writing the book, you spoke to a lot of different traders. Is there one piece of information that stands out to you from your conversations?
If you learn anything from my Little Book, let it be the simple lesson: stick with it. There will always be distractions; breaking news banners, surprises and unpredictable chaotic events, but you can’t be fazed. The biggest lesson these top traders pounded into my head, and wanted me to pass onto the readers, was that they don’t pay attention to any of that stuff. They have found through hard work, diligent study, and perhaps putting a little luck on their side – that their ability to stick with a trading plan is far more important than knowing or worrying what their neighbor is doing, what the Fed will do next, or if it is raining or snowing on some obscure rice plantation, in some random country.
5. What one piece of advice would you give to someone looking into trend following?
Do your homework. This is not buy and hold—where you buy and forget it. You have to have a set strategy going in that gets you and gets you out, otherwise you will get taken for all your worth (i.e. 2008). If this means that you have to practice trade for a period of time to wrap your arms around all of the details, then so be it. You can’t stick to a strategy that you do not have, so lay a smart foundation.
6. What's so wrong with mutual funds, anyway?
The investing world has become seduced by the idea that you can buy and hold a mutual fund for a lifetime, rewarding you with a huge nest egg when retirement sets in. Just buy and hope and forget about it they tell us. That pipe dream has been sold by a mutual fund marketing-machine and they hire serious lobbyists in Washington, DC. to keep you “in line”. However, mutual funds have gone over a decade with no returns, while simultaneously mutual funds owners have made billions on fees. How smart does that sound for you? More importantly, what happens when the next bubble pops? What happens if the government can’t blow the bubble back up? That’s the million-dollar question and the question that decides how much money you will earn over your lifetime.
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Top customer reviews
It contains what might be described as a series of case studies on leading trend-following gurus such as John Henry, but manages to avoid giving any insight into their system of methodology beyond mind-numbing generalities.
The underlying message of the book is, "Trend following is very good - try it". I accept the proposition entirely and it reflects my own investment and trading methodology. But there is no real insight granted in the description of the successful traders within the book. I regret to say that it reads more as a series of articles in a Sunday newspaper magazine than a trading book.
Read books by Stan Weinstein, Mark Minervini, even Alexander Elder if you want to get a handle on something more concrete about trend following. If you want to read about successful traders' mindsets, read Jack Schwager. If you want to learn about psychology, read "The Little Book of Behavioural Investing" by James Montier which though part of the same series is about x10 more useful than the present volume.
Fortunately, mine was purchased from a certain online auction site and will be back for sale there at a super cheap price if you still want to buy after reading this review.
"If you want to be successful, find someone who has achieved the results you want and copy what they do and you'll achieve the same results." ~Tony Robbins
What surprises me the most about Covel's books is how some people get so upset at him for advocating purely systematic trendfollowing strategies. Personally I hope that this criticism continues and his writings never make it into the broader main stream (sorry Mike), because if everybody started trendfollowing then markets might actually become efficient (see page 11) and the possibility of absolute and excess returns may diminish. I would also highly recommend this book to anyone with a formal finance education. There are many things that you will learn at university; how to consistently make money in financial markets is not one of them.