#covel

[houseshoesandtallboys]

COVEL x AEMO x SOARE

Louisville KY.

[trademasterteam]

New Post has been published on TRADE MASTER TEAM

New Post has been published on https://trademasterteam.com/forex-trading-methods/ep-216-jack-schwager-interview-3-with-michael-covel-on-trend-following-radio/35417

Ep. 216: Jack Schwager Interview #3 with Michael Covel on Trend Following Radio

[trademasterteam]

New Post has been published on TRADE MASTER TEAM

New Post has been published on https://trademasterteam.com/forex-trading-methods/ep-267-dennis-gartman-interview-with-michael-covel-on-trend-following-radio/33576

Ep. 267: Dennis Gartman Interview with Michael Covel on Trend Following Radio

you are entering an investing state of mind the system doesn't want you in the truth you want answers Michael covell has them on the trend following radio network and now reaching over 130 countries and territories Michael Cavell you today on the show I have Dennis Gartman dennis is the editor and publisher of the gartman letter Dennis appears everywhere CNBC Bloomberg you name it he's there discussing commodities capital markets he's everywhere the Gartman letter very well known Dennis highly opinionated very very very strong opinions however I do like the fact that he thinks in trends he thinks about cutting his losses I'm always always eager to have people on my show that have those views I hope you enjoy dennis Gartman hey Dennis mike koval how are you good bike how are you not too bad you're expecting me now I assume yep absolutely let me ask you a quick question what's the connection to Suffolk what's the connection of Suffolk I live here ah ok that my mother grew up their last name pruden oh really yeah Virginia yeah yeah yeah used to be really yeah so I saw that as like I figured you must live there because people that know Suffolk usually it's like oh okay you must must be some connection there yes no I'm I I live here my office is here I've lived here for the last 25 years ah ok my grandmother used to live over in riverview I I miss going over there and visiting we live in the northern part of the city up near the James River Bridge right on the run on the confluence of the announcement river and the James River okay great great well very cool I young man who works on me chip world a legend Riverview ah great awesome cool part of the world I've always I've been going down there since I was a kid so um hey let me jump right in your how did you get started your first trade your mentor what brought you into this world my first job out of graduate school was as the economist for cotton incorporated my job was to understand how the cotton futures market function how how hedgers used the cotton futures market how the commercials use it how farmers used it from there I ended up trading I was fascinated by the markets all the time and traded foreign exchange for with in NC n B now bank of america in in charlotte north carolina traded financial incentive futures for them for a while and then became enamored enough of them that bought a seat on the board of trade in chicago and move there in the oh I think the late 1970s and stayed there till the middle 1980s and at that time i was now 35 years old and too old to be on the floor the board of trade trading von future so moved to a southern Virginia and had been producing the garmin letter ever since who was my mentor and that's hard to say Gary Schilling has has been a big impact upon me Paul Tudor Jones who actually was at my desk for a while and when he was trading cotton for eli tell us down in New Orleans spent some time in Raleigh so we became friends I wouldn't say Paul is a mentor today is more of a friend hard to say who the mentors were Pete stottlemyre on the board of trade was a was a an important teacher and a number of the guys on the board of trade who were just excellent for traders were were important people to me but I'm not sure there was any one individual who was a mentor and I'm not sure there was one certain date that said this is what you want to do is sort of a serendipitous along the way you know you mentioned Chicago trading late 70s to the mid-80s that was a fairly eventful time many people that I've written about were were there at that time that that must have been quite an experience me you were exposed to quite a few successful people during that time it was the it was a period of time when the bond market was in its last rose of a 30-year bear market and it was amazing how many people had a hard time making the change from what had been a an egregious bear market in bonds to what turned to be the next thirty year bull market in bonds how many floor traders misunderstood that the market had changed it was also a period of time when tax spreads were no longer available and I'm afraid that a lot of floor traders who thought they were really very good were actually nothing more than taking the other side of huge tax spreads and the tax brothers who were doing the tax but didn't really care about giving one or two thirty seconds away on the bond futures and a lot of floor traders thought they were good traders and actually they were just the the makers of liquidity in these enormous numbers of spreads and when the tax buds were taken away it was very very difficult for those guys to us to continue on plus the the advent of the change from the floor to off the floor training was extraordinary that the in the past year or the past five years the movement from open outcry to computer has has obviously revolutionized the business if you had asked me 15 years ago of open outcry would have ever died I would have said absolutely not and clearly i would have been absolutely wrong open outcry is is on its way out except for the the execution of options complex options orders but the the advent of the computer has made training so much more i don't want to say this debt democratic and so much fairer yeah that's funny every time i see the the live shots from someone and from one of the chicago exchanges and they still try 240v purposes make it look like there's actually going on there but it's a morgue yeah there's really not it's really quite sad i was on the board of the Kansas City Board of trades board of directors for a number of years and it was actually my job as the outside board of director to explain to the floor traders that guys the game has changed and you might as well get used to the fact that but the that the screen is going to replace you and you're going out of business yeah hey here's what I want to jump in Maine today at the end of our conversation we could talk about some current stuff but I thought since I had you on today there would be some great big picture wisdom and some of my notes that i put together were pulled from and i've seen either of various numbers 19 21 22 points that were that you have really abided by and I thought these would be great to let you elaborate a little long because even though perhaps to me to you many in the audience they might sound like common sense they're not so commonly applied and I just want to start with the very first one which is just it's simple sounding but never ever add to a losing position ever and boy people love to violate that yeah we all do I mean we're human beings and we're going to how I even do it myself and doesn't every once in a while and every time you do you will usually live to regret it and when you don't regret it it's only a matter of time until you do regret it very simply put if you if you buy something at and it goes to 15 the markets telling you you're right there's only one thing that can be happening to the to the size of your account and that is it's getting larger if you buy something at 12 and it goes to 10 there's only one thing that can be happening to the size of your equity in your accountant that is it's getting smaller and you're wrong why would you do more of something that's wrong why would you do more why would you tell the market which is the sum total of the wisdom of everybody else involved that they're wrong and you're right why would you do that it doesn't make sense so when you do that it almost always is it almost always is a disaster and that dovetails right into just that the concept of buying strength buying strength selling weakness I mean these are they're not necessarily that's not obviously not a fundamental type concept it's very technically driven but that really is the way and you mentioned growing up in your formative years and on the florist in Chicago it was all about strength and weakness wasn't it well I think that it is i think it's it's not a matter of buying low and selling high that's that's just not nobody's capable of doing that it's a matter of buying high and selling higher it's a matter of being short selling something that's already weak and going down and buying it later as on the short side I as I used to say you want to fill your rocks into the wettest paper sack because it breaks the easiest and and I think that that makes sense to people and it's explained to them so yeah I I think on balance tending being a momentum traders probably better than not being buying high and selling hires that is the better way to go and the great traders the great success is the people who have constantly one the people who have survived are those who do exactly that psychologically it's not necessarily easy I mean the idea of buying strength it does it because it's the natural inclination is people I want to buy something on sale I want something cheap yes that's that is the the normal way that people like to buy things they do like to buy stuff that's on sale but then I don't think has proven the proper course of action over the course of many years you know you you can if you it's easiest to speak about stocks if if you watch some stock girl from 10 to 20 and it corrects back to 15 or 16 well then maybe you want to buy that weakness because it's still up from 10 but you don't want to buy any more at 14 if you bought some at 16 because the markets telling you you're wrong you may not want to get out but you certainly don't want to buy anymore and you can't buy anymore the rules are really our best observed if you say gee I bought it at 16 on a correction it's gone the 14 I still think I'm right but you can't buy anymore until it gets back to 17 or 18 when the markets again telling you that you're right that that's hard to do and as Pete Stottlemeyer once said do the hard trade and that's that's always the better trade do the trade that's hard to do the easy trade is usually the one that you don't want the heart rate is usually the one that you do want Dennis talk about systems from your perspective may have seen you make the comment i agree and I know many great traders will agree with it which is the idea keep your system simple robust simple straightforward what do you mean by that for the audience out there well I I'm used by the numbers of people who who go off into all sorts of esoteric technicals you know five wave ABC Corrections thing ended is the more you confuse yourself the more difficult you're going to you're going to make it try to keep things pretty simple try to draw simple trend lines try to use simple moving averages try to try to look for things where the highs are higher and the lows are higher that's a bull market try to buy it try to sell the things where the lows are lower and the highs are lower that's a bear market try to sell that don't don't make it any more sophisticated than that and really quite honestly the guy again the people who have succeeded the people who have survived seem to me to be the ones who have kept it simple who have not gone overboard into esoterica try to buy bull markets try to sell bear markets and try to keep it as simple as that you'll probably succeed more than those who are looking for Fibonacci retracements and and ABC Corrections I I find that very confusing and I find that most of us confuse ourselves you see me making case for like hey the price is what we should be looking at and let's make decisions off that and if somebody wants to develop a theory for example Elliott Wave Fibonacci retracements and all that stuff perhaps that's fine all and dandy but at the end of the day back to the very beginning point you're making here if you're losing money you're doing something wrong if you're making money you're probably doing something right and you got to keep it simple I I think so I as I tell people I'm probably 75 percent of a technical trader and probably twenty-five percent fundamentalist i do want to understand why something is going up for a fundamental reason but then i want to go and look and see is it in fact going up I've been bullish of aluminum for a long period of time since basically last October it's been one of my really better ideas uh and and I just came to the simple conclusion that automobiles were going to be using more aluminum that that the economic circumstances in China seem always to be moving from the lower left to the upper right automobile sales they are going to be increasing and under the Environmental Protection Agency's mandates to increase the miles per gallon on cars the easiest way to do that is reduced the weight and reducing late is done the easily isn't or bestbuy replacing steel with aluminum I didn't want to get into it any more sophisticated than that then aluminum stocks stopped going down then aluminum stocks started to go up they didn't make new lows they started to take out previous eyes and at that point I said the technicals are beginning turn bullishly the fundamentals and I understand them and there were plenty of people who are taking me to task for what I said sort of the work III think that's very illustrative of how to do this business have some idea as to why something is going up or why something is going down understand it to the best of your knowledge and then check and see if if you're bullish is whatever you're bullish of going up is whatever you're bearish of going down if they are do the trade you know on the flipside of that though if you had that fundamental perspective on aluminum and cars and whatnot manufacturing and the market goes against you you're going to get out you're gonna get out you don't have any choice doesn't mean you can't get back in later and and and there in probably is the toughest thing for anybody to do let's say you you bought aluminum Alcoa at at eight and a half and you got stopped out it that eight you bought it again at eight and a half you got stopped out again at eight you bought it again at eight and a half and you got stopped out at eight the hardest thing to do is to say oh look alko is trading nine it's now gone above every previous high volume starting to come in I've got to buy it now because it's an even better trade that's the hardest thing in the business to do that's the right thing because at that point everybody else who's tried to sell it probably has sold it there now short and suddenly see volume coming in on the upside death that's the hardest thing is to get stopped out several times on an idea keep making sure that you keep your your losses to a you know a dull roar and then when it finally starts to do what you think it should be doing come back with bullets blazing buy some if it works by some more if it works goes more buy some more that's the hardest thing to give you know this point that I'm going to mention that you've said which is something that I agree with as well be patient with winning trades be enormously impatient with losers now we've touched on that partly but the being patient with winning trades not just dying to take that profit but letting that move fully go that's really where you're headed there aren't you no absolutely i think one of the worst aphorisms in the businesses you never go Brooke taking a profit that's just silly the the the average investor takes a two percent profit a two percent profit a three percent profit a two percent profit then takes a forty percent loss therein lies the problem the game is is to to buy Alcoa at nine and watch it trade 16 and keep buying it because it's probably going to go to 40 that's that's the real that makes up for a lot of mistakes that makes up for a lot of errors that makes up for a lot of misjudgments and that's hard to do yeah I mean the big money is made of the big moves hey let me ask your your daily grind your daily digging through what is your processing what do you like to read what do you what kind of info nation do you like to take in how do you approach your daily world I read a lot I i read ridiculous numbers of newspapers I really are I read the other things that other people are writing I the it was interesting 25 years ago 26 years ago when i started doing this all you had was a was maybe the dow jones newswires maybe reuters none of which were really very good and at that time all you had were newspapers and and so i can remember when I moved to Suffolk 26 years ago and i was getting the china people's daily and and the Moscow Times and the South China Morning Post and the seduction vital and the postmaster was quite dismayed and even somewhat disturbed when he saw the China Daily be okay but back then it was interesting because I could read the china daily and what i read even though i was three or four days late I was still days in advance of what anybody else was seeing and so my job then was to read as I used to say the information begins on page 32 of some obscure newspaper and eventually makes its way to page one and and the trick was to know what was on page 32 that was important that was always the hard part and and and so that's what I used to do and I still do I still read newspapers copiously and I don't read them online I read them physically because there there's so much as mist on the online subscriptions they don't give you page 32 they don't give you page 64 they don't give you the little blurb they give you headlines and there's still something to be said by I I reading the Financial Times and also to say at this point in the old days the FT was so much better than the in the Wall Street Journal and I have to give the wall street journal enormous credit under under Rupert Murdoch the journal has gone from being simply a a place where earnings were reported to actually being a first-class global newspaper it's really quite good so I read the FT everyday the Financial Times of London which is still the best newspaper in the world but I make sure that I read the the the journal had front to back I flip every page i make sure i read the investors business daily I I make sure that I read the China Daily I'd try my best to read in newspapers out of Moscow which all in English by the way you know my and and I listen to what other people are saying pick up bits and pieces from from my Reuter screen and I have at hand but the vast majority of the day is spent reading and and trying to find little blurb little pieces of information that may become terribly important over there not to just over the not too distant future that's what I do and and you know I I pay attention to port movements what's moving in and out of the Port Said here in Norfolk or or in or in Los Angeles or New York or is is port traffic uppers port traffic down I spent a lot of time looking to see what the tax revenue is doing because tax revenues I think are the best indicator current indicator of how economic activity is is moving I as I like to say I'm not that smart i have not been around you know a little bit around 62 63 years now but I've learned a few things and one of the things I have learned is that I've never met anybody who's paid taxes on business they think they're going to do or hours they think they're going to work people only pay taxes on hours that they've worked in business they've done profits that they've earned and if tax revenues are going up gee I don't care what anybody else tells me about economic activity economic activity is doing better so I pay attention to that sort of thing I and I look for obscure things I I once got interested in what was happening in Japan because pet fails were picking up rather dramatically it's little bits and pieces like that that are that are important and I've spent most my time in the last year and a half in Asia and I while I'm really not coming at it from a fundamental perspective it's hard not to just be an observer of data because it's so terribly interesting to just take in all the data points that are coming every which way and it's my first time spending a lot of time in Asia and it just it's terribly fascinating yeah so let me jump to the idea of mass psychology so we've seen in the last 15 years we've seen the Nobel Prizes being handed out whether it's Schiller vernon smith daniel kahneman and i think they really helped and I'm assuming the idea of an efficient market hypothesis is not something you necessarily okay yeah I was assuming but you know we've seen these Nobel Prizes handed out to these smart guys that have have really put down some great thoughts on mass psychology but you know I always argue that I think a lot of the traders on the floors in chicago in the early 80s had actually figured out the whole mass psychology thing from a trading perspective and we're being rewarded for it they just didn't get Nobel prizes for it well III will I've been on in speech after speech and in report after report that I've written I will say that the most important thing that's happened in the study of economics in the past 20 years is is the footing on a pedestal and one that I think is long overdue the notion that psychology has something to do with economics I I do find it almost comical disbelief in the efficient market because I find it refuted in just too many different men to distill many people who are just good at this and the efficient market theory says nobody will be good at this except by by mere accident I I'm pleased to find out that we finally do have the that's fair skis and the conman's at all who hair are being rewarded for actually knocking on the door of the efficient market people with a big broad axe and saying you're wrong that psychology does in fact have an impact in what goes on that people are human we are irrational for more often than we're rational as I like to say we are irrational beings dealing with rational information and sometimes we're rational beings dealing with irrational information out of that how can you get substantive rationality and that's what the efficient market theory seems to to to believe in so yeah I'm not a believer in efficient markets I'm a believer and behavioral economics and I think that's a great great thing that's happened yeah I've had quite a few behavioral economist oh my on my show and I've really enjoyed the conversations and it's just so much more pragmatic and down-to-earth and frankly scientific and like okay here's the evidence let's take a look at this let's what does this mean let's observe it no just a dogmatic theory that says this is the way the world is and if contrary evidence is put out well we're just going to keep saying what we've said all along it's do you think the battle has been won though do you think do you think the efficient market hypothesis is taken the stake to the heart so to speak yeah I do I actually do I think it takes a long time the the change in academia is is very very slow it take its glacial in changing and I think that it is indeed changing I i think the there will come a time 50 years from now when one behavioral economics will know what will boo by some chance be rendered the funked but for right now behavioral economics i think is is is the young upstart and the price the bright upstart and the efficient market theory is the old guard the regime asean and it's losing its validity hey Dennis let's spend a few minutes just talking about current today take your thoughts on a wide assortment of issues pretty hectic chaotic times right now we've got a stock market that looks lovely it straight up nobody can argue with a straight line up that's fantastic until it decides to bend at some point in time but geopolitically things are getting a little rough around the edges aren't they well first of all things are always rough around the edges it's just that we know the rough edges better than we used to know the rough edges 20 years ago you would not have known about a rebellion in eastern Ukraine believe me you wouldn't have known it it would have been covered on page 32 of some obscure newspapers and only a few people would have discussed it now because of the advent of the internet because of the advent of better communications not only do you know it its front and center the world is actually interestingly enough that I'm not a I'm not a fan of our president but our president actually made a statement last week that was really quite truthful and correct the world is safer now than it ever has been it's hard to believe but it's true it's just that what what problems exist are now so much more readily available to us we understand them faster we hear them faster they are debated more there's it 24 7 News is a is a wonderful thing but it's also better disconcerting because it jangles the nerves but to be quite honest this is actually the safest of all times not the not the unsafe escuta but because we have to deal with it because it's 24 7 News sure seems like it's an unsafe place and because of that markets become rather schizophrenic i mean the the manner in which everything reversed last Thursday on the Malaysian Air flight disaster how why should the the why should the the Australian dollar suddenly sell-off relative the Japanese yen predicated upon a disaster in Ukraine I don't know didn't make any sense to me but it did because panic ensued and it's and it's part of the fact that it's a 24-7 news cycle were news is absolutely on the front pages 25 years ago if a plane had been shot down in eastern Ukraine we wouldn't have known about it for two or three days yeah yeah it's it's definitely disconcerting as you say I think we have all become a little to a custom it's almost like we we kind of enjoy the fear perhaps I I sometimes say that 911 and the dot-com crash and still the type of fear in America that just I just wish would go away I I don't think it's it's it's not useful it's not helpful it's not helpful it's not healthy but it is the reality yeah yeah hey Dennis listen I appreciate you taking the time today where can we direct people to you easiest thing to do is just to go to our website the gartman letter calm and happy let people take a look at at the work that's done I I get up every morning about one o'clock a.m. eastern time and try to have nine eight or nine pages of what I hope is is reasonably cogent sometimes comical and and I hopeful insightful use of what's going on in the world as I as I like to tell people my job is to be the liberal arts major the capital markets I know a fair amount about the grain market I know a fair amount about foreign exchange I know a fair amount about equities a fair amount about oil um a fair amount about the fed and in debt and a fair amount about political circumstances I I don't know everything about everything but I'm fairly well-versed in a lot of stuff and my job is to explain to the grain trader what's happening in the foreign exchange market that may affect the grain business my job is to explain to the the foreign exchange diva what's happening over in the oil market that it may have an impact upon foreign exchange or to explain to the grain trader what's going on over in the oil market I can't tell the oil trader more about oil and he or she knows and if I can haven't help that person but I I tend to bring a broad overview as to what's going on a view for far from the madding crowd here in suffolk virginia away from the noise of New York away from the noise of Chicago away from the noise of London and say you know what I think this is what's really going on so they can go to the garmin letter com take a look at what what it is it's produced and I'll be blunt it's not cheap but because it comes out every day as we've had subscribers with us now for 25 years and they seemed to enjoy us some as a friend of mine once said the garmin letter is red in all the great men's restrooms around the world early in the morning hey took two questions I want to dress that things you just said 1am would you go to bed but can I learned years and years ago an undergraduate school I had to work to go to school I was also a diver I had to hit the springboard and something had to get something had to give and give was sleep and I've learned to get along with three and four hours sleep ever since then I learned that that Winston Churchill got my on three hours sleep and he seem to do pretty well in life so if he could do it so too could I it helps to pick up four or five hours upon everybody else's as my daughter's used to say well dad hasn't a choice he's got an IQ of 70 he needs that extra three hours hey one last question are we ever going to see interest income again yes I may be dead okay yeah we will will will see the Fed Funds right back at five percent in the next five years or so there's not a question about that uh it'll it will eventually come a normalization of rates will occur and the one thing you do now is when the Fed begins to tighten rates they will it will be the first of many tightening not not not not a one-off but the first of many to come and that may well that will be indicative of growth in the economy not not indicative of inflation hey Dennis thank you for taking the time today and I I hear you about the three hours of sleep duh but you're better man that I I don't know if I can function I it's uh I don't know how you do it but hey listen thank you for taking the time today at best a lot other two had been asked what we'll do it again in the future and as I like to sign off every day good luck in Detroit take care Dennis I help people I help them to learn about understand and execute trend following strategies where should you start number one my podcast 250 episodes dive in I'm talking Nobel Prize winners top fund managers top traders behavioral psychologists the insights you need to get ahead and make money number to my website trend-following calm /resources free trend following white papers and a free email update for my firm number three my books including trend following the complete turtle trader train Commandments and a little book of trading some best sellers in there there's a reason why I'm not being cocky there's just information in those books that you will not find anywhere else number four my systems with personal training at trend-following calm for those of you that want more for those of you that want to ask questions for those of you that need specific insights I go the extra mile with my systems and my training lastly I will also send you free of charge a trend following CD of extras simple deal review one of my books on amazon com or write a review on iTunes then send me a mailing address that's it I'll send you the CD I have one last bit of advice don't trust the state to take care of you do it yourself you'll have a much better life you

[trademasterteam]

New Post has been published on TRADE MASTER TEAM

New Post has been published on https://trademasterteam.com/forex-trading-methods/ep-4-mike-shell-interview-with-michael-covel-on-trend-following-radio/33314

Ep. 4: Mike Shell Interview with Michael Covel on Trend Following Radio

[trademasterteam]

New Post has been published on TRADE MASTER TEAM

New Post has been published on https://trademasterteam.com/forex-trading-methods/ep-306-tom-basso-interview-4-with-michael-covel-on-trend-following-radio/33225

Ep. 306: Tom Basso Interview #4 with Michael Covel on Trend Following Radio

you are entering an investing state of mind the system doesn't want you in the truth you want answers Michael Koval has them on the trend following Radio Network and now reaching over 130 countries and territories Michael Koval today on the podcast I have Tom Basso Tom originally profiled in Jack Swagger's the new market Wizards ran a very successful trend-following firm for a very long time now as a private investor he's still a trend following trader tom has appeared on my podcast multiple times and is a fantastic guest if you don't learn something from Tom Basso please give up and retire I hope you enjoyed this conversation with Tom Basso how are you I am doing fantastic just got back from two weeks and French Polynesia and very relaxed I'm taking a break from moving site tons of gravel in my yard right now to talk to you and then I'll go back to that one we're doing the five tons of gravel sounds like good exercise to say the least that's the way I'll do it yeah so french polynesia I've not been there even though I've been in roughly that same part of the world that's probably I'm guessing if I looked at a map that's probably another ten hours from where I've been in Southeast Asia eyebrow yes it's in the southern hemisphere just kind of done by New Zealand area it's pretty far south and although very you know in their summer time right now so Haiti's humid probably a lot like Vietnam and some other places in the summer could you live in a place like that not if I had my choices but yeah I could live there if I had to but I really enjoy Arizona a lot it has the best of it seems to me the mountains and some of the peace and quiet in the beautiful trees and then it's got the desert down in a valley with Phoenix area where there's a lot of action lots of concerts and plays and restaurants and things to do there are only 90 minutes away from each other so I sort of have the best of both worlds you know I have to give you and Jack Swagger and Charles Falkner all a big shout out because my podcast keeps evolving and changing and I've had a lot of non trading guests on and some fairly noteworthy but I think the three of you guys coming on really early and kind of giving me some credibility has really helped to expand things out so I'm most appreciative for you sticking with me Tom I always have fun talking to you I I spend zero time preparing for it and it's just a it's just a hole in my schedule and it's always fun listen here's where I want to go I thought there's something fairly topical we could talk about I don't know how you want to set it up or how we should play with it but I've seen in the headlines there's been some hedge funds that have had not the greatest returns this year and a lot of people are boning the price of oil which is kind of funny you would think oil drops everyone should be happy but apparently there's so many budgets and programs and social programs tie to high oil around the world and so a lot of people aren't happy but hey this is a zero-sum games so quite a few people that in our little world are happy that oil has dropped but I think what's so interesting is how many people and I haven't tried to Google this but how many people five six seven months ago we're talking about a 50% crater in oil just nobody was predicting this at all but then there's one trading strategy it seemed to do exceptionally well during this unpredictable run huh trend following you know you have to do is short at some place up around 100 or 90 and and enjoy the ride yeah but you you make it sound so simple I mean there's a there's some various I saw the head of OPEC and he he said well the speculators are doing this a hold on it what price are the speculators not involved in oil they're involved at every single price the reason the speculators are in there helps to create a price without the speculators there and the constant buying and selling you wouldn't know where the price of oil is from second to second now you might know where it was from maybe day to day or maybe even hour the hour is big large companies and large hedgers and things made a transaction but the market would be very inefficient it would jump all over the place with speculators there you have every second trades going off and you know exactly where the price only over second place second at Tom I know you personally don't ponder these things so much because you you've been there done that you understand it deep in your gut but when you you hear a headline where the head of OPEC is saying that the price is where it should not be the fundamentals do not support this price and and cast blame at speculators for this particular point of price explain to the audience just how disingenuous that is well it's disingenuous because the price of anything is where someone will buy and sell it to each other app yes a speculator would be selling it and driving the price down someone else has to be buying it to make that transaction happen and for that person to be buying it that could also be a speculator so wait a second how can speculators are driving it down as speculators on both sides of that trade or it could have been a hedge or like let's say Southwest Airlines in the past has come in and bought yes when they thought it was cheap and maybe they're thinking that now so maybe the speculators selling it to Southwest yeah in they're hedging their future fuel costs all right fine well then it goes down cheaper Oh Southwest can buy some more future cheap oil I don't see you know nobody ever complains like OPEC when the prices will skyrocket and up to a hundred and something but the same speculators are there at that point in time as they are right now that doesn't like speculators don't just short the market they they go both ways and so it's it's this very it's for public relations it's try to place blame that's trying to placate their people because Saudi Arabia depends so much as does Norway and there's a true yeah Norway I think it is it was some of the socialistic type of programs out there in the countries that depend on oil I think Brazil to some extent that is whele of all countries that are leaning towards liberal socialist types of things and using oil revenues to try to help pay for them well now they don't have those revenues anymore it's in a level that they used to so they try to place blame China you know not point the finger at themselves for setting up a budget that was based on the house of cards but you know that's the way the world works and stays a cinch yeah you know so I just was in Dubai Thursday Friday Saturday and so when you talk about when the price of oil is high no one complains well I know why they're not complaining because I just saw what they've been building with that oil money over there it's I mean frankly it's fabulous they've done a fabulous job building out a city I don't know if it's where I'd want to live but I can't really done a hell of a job I've seen the photos on your Facebook page very impressive yeah they've done a hell of a job hey let me jump into something really basic and I was since we've talked a bunch of times I the real challenge in speaking with you is because to try not let you get the feeling of being bored so like how do I make sure that I'm giving you something somewhat fresh very difficult to do very difficult to do but listen let's talk about your stomach lining for a second and just go back and just I think this is a good reminder for whether it's the professional out there the new trader the new investor and talk about Tom Basso stomach lining and if you don't mind also the rush and the devastation you know we have that we can have this emotional rush oh my gosh I make it so much money and I'm losing money the devastation but talk about your own stomach lining Tom let's just talk about that that wining the first of all my stomach lining seems to be doing just fine as far as I can tell I have never had any ulcers or anything else knock on wood I guess like in my early trading years which was well reported in Swagger's Newmarket was its chapter on me there were some silver trades that went all over the place that really was catching my attention almost hour by hour it was pretty much it was during the hunt cornering the silver market episode there and that was more excitement that I really needed and I tried to analyze why was I so uncomfortable and how do I stay true to trend calling while at the same time dealing with the issue that I've got a position that I want to let my profits run cut my losses short but the position that I have now is moving all over the place by tens of thousands a day on an account that just a few months ago was maybe fifty thousand or a hundred thousand or something like that now it's worth 400,000 or 500,000 and it's moving up and down tens of thousands a day that kind of opens your eye a lot and I realized out of that that there's no reason you can't stay true to trend following and stay with the position you just need to manage the position sighs so all I did was figure out ways to volatility adjust and to risk adjusts my positions on going throughout the trade so that things would become true tame and and the stomach lining would be kept very intact there was nothing to get excited about because one day was roughly the same as every other day and that that's what I learned out of the early trading mistakes and situations where they really would have gotten to my stomach boiling over my lifetime the ones we got to trends that days we just automated a lot of that that's at the point where you know it just happened automatically and the only thing that would affect my stomach's lighting at that point would be a power outage or you know the internet lines go down or you know the programs not working properly or something like that certainly wasn't the markets anymore you know I've seen in many interviews that you've had and going back to our conversations you've talked about how you would mentally rehearse catastrophic events and I guess if you've got a position on and it's the wrong kind of position if you're long and you don't adjust and oil drops 50 percent that's a catastrophic event and I saw a great comment from van Tharp and he talked about that he got a phone call from you once and and you said that you had a disaster the prior day and you couldn't answer the phone you couldn't talk to van but basically you said it was a planned disaster so you've been thinking about is Vinay young man it's like how do I plan for catastrophic events how do I plan for the unexpected because it's gonna happen right exactly later that was amazed at how many CTAs professional traders did not plan through disasters we would once a year at least have it what I would call a disaster day and I would sell everybody ahead of time so everybody in the company knew what to expect and I asked a little bit extra out of everybody and we moved a section of the company to our off-site location to operate in an alternative mode and try to run the company from the secondary location well a certain number of people stayed in the primary location to answer phone calls from clients and things that would come in that would be normal routine business and we didn't want to have our disaster day exercise affecting you know the clients being able to get to you know to us and schedule appointments or talk to us or something with vans call for instance that wasn't a huge league necessary I absolutely I got to do this right today call so I put him off because I was trying to make sure who did this exercise and it required a whole lot of attention because when you're operating on backup equipment it's it's a little bit more clunky than it would be with your mainstream stuff so the way we did all day was we started then we we offloaded data to the back of facility we put orders in from the backup facility we tried to call our trading desk from the backup facility we tried to you know look at procedures and things and modify things so then we have all the word files and Excel spreadsheets and different things that we needed to operate and invariably what you get under those exercises is out there's a good list of things that you missed or they have changed since last time you did a disaster backup and you can improve and tighten your operations I find it amazing to me that some CTAs just have a simple operation and they don't have a clue what would happen if they say the mobile phones went down or if you know internet goes down you know you lose electricity one of your trading desks is no longer available for some reason there's so many different scenarios but if you get actually gone through some of them and actually tried to tell your trading partners what you're doing I always found that they were very very very excited in working with me to generate ways of operating in an emergency because they they have the same problem on their side they want to know that I'm gonna be able to deal with what happens to me and in some of these cases they were giving us money to trade so we were trying to you know be good partners I think that's something that we can do in a lot of aspects of life it's amazing how many people just kind of let life put it to them and then there's the stress of dealing with it as opposed to trying to say well I could go this way and those following two or three things could happen or it might not happen and it might be this and if it is you know do I go to plan B or do I try to solve that problem there's a lot of things you can do as you think ahead a little bit do a little plan and a little exercising and then it's not so stressful when it happens those catastrophic events though it's not necessarily only what you just described thinking in terms of catastrophic events is also about your portfolio your trading strategy sure it is and so there's some extent you know probably the most catastrophic mood that I ever saw was when we had written invaded Iraq during the HW when we went to Kuwait into Iraq those years when I was it's closing down the markets I think the oil was at $32 a barrel we were long by 8 o'clock that night we had had a bit of a computer issue at Trent stat and I was saying late that night I left having solved the problem at about 8:00 p.m. which would have been well you know six hours or more after the close and oil was up to $40 a barrel and we were rolling into Iraq so I thought oh this is ought to be pretty nice and I go to sleep and I come in the next day and oil was at $22 a barrel and we you know we're stopped out and take a chunk of a loss I think we lost and all the portfolio's about five or six percent of the whole portfolio that day which was that would pay and to this day the largest single-day loss that I saw in trading of futures markets so I mean we made it back and we're at new highs a month or two later three months later I wasn't in a big deal but it was Wow six percent in one day that's interesting it wasn't something that was unusual because yeah we we saw the markets dead it was a bad day but we can recover from the six percent loss it's not going to hurt you and we had managed that position properly he had gotten very volatile so we were down to minimum size positions when it got down to 22 a lot of accounts couldn't even own a position because the volatility was too great so it would keep him out of a position altogether you know life was Gordon Lee like I said came back Andrew nice shortly thereafter it sounds so simple but I think for most people that simple story can go right over their head and and the big picture point there is that you're saying hey look we've got to have chips to play the game our egos are not so big that we know what's gonna happen next so if the markets not going our way let's take our losses get out and come back to play another day exactly right that's all it is it's like it's how do you get to your next 1,000 or 2,000 or 10,000 trades it's all of matter statistics any one trade can either win or lose yeah over time I usually figured that we were around 33% profitable and about 67% of the time unprofitable fun trades and of course the winners were worth a lot more than the losers were so it worked out but yeah you got to come back and do those next 2,000 so that you can get me 33% that are profitable and deal with 67 that aren't in every piece of media and of course media is not relevant to Trent volley trading but it if you if you look at media all media whether it's print radio online TV is all about the trade for that day the trade for that day and there you just calmly and coolly say hey hold on I don't care about one trade I care about a thousand trades into the future that's what I want to be focused on something that van Tharp it's a long time ago and I remember it so well is a good day for a trader is following your strategy in other words trying to get to those next 1000 trades and just doing what you do over and over again it's not whether you made money or lost money today it's letting you followed your strategy today but on that next set of trades that you're supposed to have put on according to your strategy and when you get into that mode then training gets a little less exciting your stomach lining feels a lot better and you'll have more success you've spent a lot of time in the last couple years I think anyone that's it's been online as seeing this is you quite enjoy interacting with people and you're on Twitter and you're on Facebook and you weren't doing this a couple years ago but now you do and I I know you've given a lot of interviews and you've stayed connected with people and you clearly really I do think though what's interesting is that you have a definite political opinion and I'm not necessarily curious about the political opinion I know what it is and I share her a lot of those beliefs but I think for some people they could see the political opinions and get confused they could say well well Tom's got this strong opinion of it and they could somehow or another think you're trading is living and breathing with your political opinion and it's not no not at all my political opinion is that you know I think just like trading where traders have to take self responsibility to be successful if you're blaming the guys on the floor for screwing you on the trade or if you're blaming your broker for giving you the wrong advice or whatever you're gonna fail you got to take self-responsibility you have to be responsible finally who are you pulling the trigger on something and I think that's what I fail to see a lot throughout political life as well there's a lot of finger-pointing all the time something happens and you know so-and-so is blaming Congress and so on Congress is blaming the president and you know everybody's blaming everybody else and I think they're now looking to themselves and saying what could they have done and see these parties involved make that not happen or happen better or whatever and I picked ratings the same way and so I I i view a lot of my political views come from that same vent but it's certainly not it doesn't have anything to do with my training my training is just purely mathematical and it's the directions up I want to be long if it says I want to be short it's not any more complicated than that you know I've had some I've had some traders on here this fall current CTAs running multi-billion dollar phones really interesting people to talk to and I'll get feedback and they'll come on the show and they'll say hey we're price driven we're 100 percent systematic this is what we do and I'll get these emails some people that like no you don't get it Covell there's a there's a secret fundamental overlay there's discretion going on in the back room and I'm just it still strikes me as funny as it's so many trend-following traders just like you will come out and say this is a exactly what we do there is no fundamental input and people still think no there's a secret sauce of human discretion that you don't know about miking and you're missing the point and you don't realize that Basso has really got a huge fundamental step for the better I don't know time I gotta move five times a gravel this afternoon you know I think it comes down to people love to have complicated things a lot of traders when they start out what do they do they go yet Koval's brook you get you know Schwager stuff you get all sorts you read read read read and get a lot of opinions about all sorts of different ways of trading fundamental and technical and there's a pattern than universe type stuff like Elliott Wave and Fibonacci and all that stuff and you you just the poor traders starting out just looks at all this and just can't figure out what to do next and the human mind wants to make something as important as making money in the market it's a very complicated thing like Tom's been around for a lot of years so that's why he's so experienced and that's why successful but the reality of it is you know simple things working breasted swagger had a way of saying it there's degrees of freedom in other words the more things you add to a strategy can you start out with a simple moving average then you say I'll only do the bicycle in the moving average of this if the moon is in the right phase and then you then you add on that that you got to have it only on the open and not any other time during the day and it's gotta meet those criteria and then start adding filter after photo after photo pretty soon you'll do a trade you'll sit there and look at all this stuff and will first of all be confused because you won't be able to process all that information in your brain and then you'll miss out on traits because you just can't function there's so much complicated nature so you sit there and watch the markets and wish that you could trade you know and make some money and really simple things are very robust they will there's very little about them that can fail because it's so simple there's not anything but Christ price feed your profits and it feeds your losses so if you states a price with all your strategies you are strategizing on that variable that feeds directly one to one your profits and losses so you never get out of sync if you're if you're over there looking at interest rates and trying to predict stock market indices you've got two different variables going on there the interest rates may agree with the stock market they may not agree with the stock market we could get caught sideways someplace but if you're looking at stock indexes prices and your buying and selling stock indices it's one-to-one you know we're gonna make money or lose money on what stock and assist you and therefore you never get out of whack you're always in sync with the market and you don't have to stress out of it you know Tom you mentioned traders in overwhelming amounts of information and confusion and different strategies and you mentioned like Elliott Wave what not the one of the things that I found really useful in wrapping my arms around strategies when I was just a new guy trying to understand as well was not to necessarily just trust what Thom Basso has to say but I would look at the performance data and I could not for all the strategies out there in the quote technical space I couldn't find any strategy that had this massive number of participants openly putting the performance data out each month where you could compare those performance data and see that there was often some correlation maybe not exact but there was some correlation and you could wrap your arms and say Wow Trent following has all these participants they seem to be doing something similar I feel comfortable about this this is a useful piece of information for me whereas I've never been able to find that kind of overwhelming amount of data for any other technical strategy it's only trend-following that's correct and you'll find that the trend followers also tend to lose money at the same time and I did Studies on if you took the average volatility high-low range of various commodity markets over a month time and then look at the performance of CTAs in general over that same month you would find a direct correlation to highly volatile months led to larger sentier profits and lower volatility months led to smaller CTA profits or even losses and so it made a lot of sense to me that if people are really trend falling you want the market to go a long way if it's sitting there in one place I'm not gonna specially can't make any money if the prices aren't moving so this is a simple a simple study and a simple result and it said exactly the way it mean exactly the way that I wanted when I thought it would lean that was published some place a long time ago makes sense doesn't it I mean if the prices move when shrimp dollars convection money I'm just amazed that so many traders will believe in some type of a strategy and then they can't find other market participants actually using this so they decide on their lonesome I have this one novel strategy and they must think in their own mind well it's worth more to me because I'm the only one doing it whereas I'm like hold on I want to see that some other smart people before me have done this well that'd be nice but so I can't say that trend selling is the only way that they could possibly make money in the markets but this certainly is one that has been tried and tested by a lot of different you know Minds over the years and you gotta say that it's certainly a a sound way to approach things and to keep yourself from getting in harm's way too awfully much hey let me have a couple more questions on you I'll let you go move some gravel around that's a no I mean I'm off to yoga after yeah well while you're doing gravel I'm gonna do yoga so we'll see who sweats more hey years ago your firm did a study and people can still find it online and I think there's some big picture points to it that still are relevant to this day which is a hot hand type issue and specifically for people that put money with trading managers and they often want to put the money with the manager and specifically let's talk about trend factors but they want to put the money with the manager when they've had this great run and they just say it's the human condition behavioral economics behavioral finance now I want to give the money whereas I think in your study why don't you explain what you found doubt it's a little bit different than what people think well what I found out was that the two studies together the prices move therefore trend all just make money so trend follower is making money means their equity Kirk gets better and better so the trends persist for maybe several months maybe that you know trend cause are now knocking it out of the park so then all the money in the world starts rushing in and floods in there and then the markets start stalling out of those trends trend father was going into a sideways or a drawdown then at the bottom of the drawdown at the pit of you know that the trough of the equity curve at the low of the drawdown the markets are now going sideways and are about to break out up or down or whatever but they're just building pressure waiting for to explode and that's when people are pulling money out just before the next big search and so what I found is that when you took the dollar weighted return which is the actual returns that the CTA's would have provided head you just put your money with them and left it alone versus the excuse me the time-weighted returns I got that wrong the time-weighted return was what the CTA's will do if you just left it alone the dollar weighted return takes into account clients giving the CTA's money at certain times and taking it out at other times the time-weighted return which is the CTA's actual returns by their strategy they always better than the dollar-weighted returns of what the clients did terms of coming in and going out so clients were actually hurting their performance across the entire industry and I forget where there was a hundred percent of the cases or some very high percentage at least seventy five percent I can't remember the exact study results now but it was a huge overwhelming preponderance and certainly averaged over the whole industry it was definitely hurting to have clients put their money in or take money out they were hurting themselves and I find so interesting we might have even spoken about this before is that so many aspects of successful trend-following trade have the understanding of behavioral economics behavioral finance and how to deal with biases and using heuristics to trade long before it was a popular subject long before the Nobel Prizes were handed out there's this group of traders that were essentially while not promoting the idea that hey we understand behavioral economics were effectively trading in a way where clearly they understood what all the academic research that was to follow in the decades to come the turtles every uou I mean all in many of your peers yeah I mean it was just is fascinating you know oh yeah all I'm doing is saying you know it's crude oil markets going down it's not up to Tom to figure out how or why it's going down it's simply going down it is you know and what would you want to be positioned today if you had your choice would you rather be positioned and enjoying the downslide or would you be trying to jump in saying low is low and maybe it's going up from here you know to me you have to trim this down I just want to be short and when it turns around goes the other way I want to be long I don't really want to think too much about it I've got other things I'd rather think about and I think the best reacting to the behavior of a whole bunch of whole markets a lot of traders that may or may not be using fundamentals or hedge techniques or whatever they're using to make their decisions but the aggregate all feeds into that price makes it go up makes it go down so it's the it's the dependent variable of all that behavior decision-making of all of those rest of the market and I'm just reading it in the price and gone with it and not thinking too much more than that about it you know I love that you just said is I've got and we can kind of go this direction with the rest of our conversation I think it's some of the most important stuff it's very personal I got other things I would rather think about and I think what that really says is to people they're paying close attention hey my name is Tom I have this system I've done the homework I've done the research I know why it works I'm comfortable with it and then once it's in place and I put machine in place I'm not running around like a chicken with his head cut off you know all nervous and antsy all day long and as you said I got other things I'd want to do and I think what that really says though too is it life is short and you've got to find ways to enjoy your time and have fun but the idea of of sitting around and staring at a screen and talking trading all the time trading is just it's a useful byproduct of a process of a machine but I you know I could tell you don't really care it's not what you are it's something you know how to do but it doesn't define you yeah I mean I I know how to golf but I don't consider myself necessarily a one-dimensional golfer and I don't let him die or you know about whether I can get to the golf course I haven't touched my golf clubs thanks to the crew since eet I haven't touched him in about three and a half weeks now and I'm still enjoying life I you know it's not like I need to get over there and it falls right after we get off the phone I think a lot of people get into trading and it they they get addicted to that almost a gambling nature on at all to me it's just managing my portfolio yet the less time I can take to do it the more time we have to move gravel or talk to you or food in my backyard or you know no I thought balls there's lots of things or take a cruise to see he a lot of people won't take vacations because they're afraid they're gonna miss something in the markets I just take along my computer and I go do about 10 20 minutes a day I'm a ship's satellite internet and I'm done that's not to burden ISM you know what you just said there I think is so terribly important so many people run their lives afraid they will miss something and I think that is what's happened in modern society is especially at the media coverage it's all built around a really intense fear yeah and I think they're gonna miss something so that if they're making decisions based on what's it the dead beside today then they're glued to the screens trying to you know wait so what the Shred decisions coming up I gotta stop something are if the shod decision causes the market through my stop when i get executed i find out about it when they close the markets down in the afternoon which I'll probably do after our call it's not something I've been a sit here and wanna you know wait until the Fed decides to publish their darn report that means I'm sitting here all day long in front of a computer but that's not quality of life but top cat but can't you listen to the Fed and use some extra discretion to improve your trend-following performance no I cannot I cannot so I just don't I did enough studies that in the early years talked about one failure did my discretionary decision-making make and you know overlaying it on trend following or anything and I came clearly convinced that I was not adding any value so therefore why I just fired myself basically I love it I love it I mean you know I think it's so fun talking to you is because you just or so you're so clean meticulous and precise about about you're thinking about your process your system your machine and I just know some people will listen and they're just gonna go oh Tom doesn't know that we can improve what he's doing it can get better almost like a Six Million Dollar Man we can we get better faster stronger well then might be but you gotta remember I'm 62 and retired and enjoying life so I don't wanna you know create a job out of us certainly there's things I could do to try to improve what I'm doing I'm sure if I had a team of computer programs like it did back in the old days at rents that I I probably have a couple ideas I could work on but you know it's just not worth spending that kind of money and effort and then trying to pick up a few extra percent here and there it's just not what I do today so I keep it simple and I keep it low fixed overhead and I have zero regulation fees at this point I have very little to no chance of somebody suing me like I did in the old days you end up with a low liability easy to run retirement type of investment strategy and it fits my situation and my dollars and my expertise level and that's what every trader should always get to is it themselves and their capital and their expertise design the strategy around those things not around what Tom Vasa does or Michael Koval does or anybody else everybody out there needs to do what they need to do for themselves that's what creates the success cuz then they can they can do it over and over again with ease if you're trying to copy somebody else you're just not going to ever be at ease with that new you're always going to be trying to compare yourself to that person or try to do things that are not in your expertise levels or maybe you don't have enough capital for or who knows but if you design what you're doing for yourself then that's where success lies we kind of talked about this last time a little I can I get emails from young people all the time and they want advice on where can I go to get hired in the CTA space the trend pong space who will hire me what what insight can you give me and I think stories like the turtle story for example has really created and now this is the story is so well known people think well this is gonna be I can I can recreate this I can replicate this I if I can just get my toe in the door whereas I I think you have some different perspectives about the managed money space today why don't you talk about that and maybe offer some advice to a young person today that wants to trade and maybe give an alternate view on ways to go about it versus the ways that people have seen in the last 20 30 40 years maybe you might have a point that things have changed from your perspective and maybe there's another way to go about it it was clearly if you took today's world and you took Tom personally me I could not do today what I ended up doing back in the 70s 80s starting up trend stat and becoming successful doing all that I don't think that would be a reasonable path to success in today's world there's too many billion dollar money managers with extensive staffs I have no idea what their our criteria is to hire somebody but I would dare say it'd be hard to get a lot of those folks imagine and I think because of the regulation increasing the cost of doing business increasing in the CTA space and ease your approach to learning out of trade is that probably become your own trader and continue to work very hard at whatever it is that you did before trading you know your main job so to speak I was a chemical engineering all day so work hard at Chemical Engineering let's say save as much money as you can keep building your portfolio bigger and bigger and keep building your expertise and training bigger and bigger at some point you'll be making enough money to look at your training success and say you know I'm making as much money off of training as I am being a chemical engineer maybe I don't need to be a chemical engineer anymore and then you transition and then you're where I am right now a trading call time I think that the CTA space has gotten to be very difficult to break into and I'm really battle lost at this point partly because I've been out of the business for 11 years but also just because I I can't quite see my way clear how would you go about doing that that's you definitely would need capital infusions or partners that would be able to bring in sizable amounts of assets to trade be able to finance a staff of five or ten at least lots of phone systems the computers the regulatory environment all the prospectuses and some of those perspectives you can well fifteen hundred thousand dollars really quickly that were the legal expense so audits and CPA things it's it's good to be a pretty tough game to just break into for a little guy operating out of the garage but that doesn't take away from the fact that if you want to trade trade your money or friends and family or something to that effect that opportunity is wide open you're you're not saying trading is tougher to break into you're saying what we've all read about the manage money is tougher but manage money is very tough today and the business of being a CTA Mistah trading your own is free of regulation it's very low overhead no Commission's now we're in the old days having being manager and you can negotiate your commissions and the retail public had to pay a higher brokerage fee now everybody plays loans brokerage fees so there's almost no cost to trading these days and you really can as a small operator do things that the big guys almost can't do I never used to trade orange juice a whole lot while I was at tredstep but I trade it now because I can because I'm some small of a small dollar size compared to what I used to be so I don't have to worry about it I can go into markets that I did didn't go into before very much and so I think there's you have to examine as an individual trader do you want to go and work at a CTA because you're trying to pick up extra tea so what if their expertise is is bad maybe I mean earlier in the day John Henry was one of the big guys say you got a job at John Henry well he was going up and down with 40% drawdowns yeah he traded billions of dollars I don't think what he was doing made a super amount of sense to me so I thought it was probably always going to lead to very large draw downs and run ups because he was more leveraged and maybe if you go work for somebody like that he's teaching me that type of stuff you're learning bad habits maybe so there's it's not a panacea to go to work for somebody else and learn what they're doing I think it's better for you to learn how to do it on your own and trade your own stuff successfully and then then you're right where you need to be you just need to try to find ways of getting work should capital to trade and that means working harder taking a second job doing getting a maybe a degree to get a promotion you know getting that next rung up on the ladder and the corporate world so that you can have more money to put away Tom great wisdom great wisdom I really like the way how you just lay that out the the lack of a panacea I think a lot of people they dream and they fantasize about the panacea but there isn't one no other wasn't becoming a trader to get to where I am right now when I'm trading my own account living off of it that is something that is difficult not to get to matter where you know where you're starting from unless you're starting from like a major inheritance you've got all the money in the world no that would be an easier time transitioning but you're starting from where I started as a guy out of college in the $4,000 student loan in a chemical engineering job and zero on that worth a negative net worth actually I think you you have to realize that it's it's a road no matter which way you go Tom I'm thinking the best place to send people to check you out to maybe connect with you bakso underscore Tom which is your twitter handle is that the best place probably Facebook I look at more I put stuff out on Twitter because then it's attached to Facebook and it goes to both places but those are usually my market directional calls I tried to do that to just keep my friends and family informed of which way I'm leaning and it is what it is you noticed I was what two three days late when I was done in Tahiti on the cruise this is a bad bandwidth aside got a cell come in and then I got whipsawed on it because it made new highs again apologize for people who were trying to follow that but I recommend you don't follow it use it to what it's worth what it's it's free and possibly worth about that much and I think that you have to do your own thing and create your own indicators but find me on Facebook is probably easiest way I am to see that probably quicker I also told that trends calm but you know address is fine send me an email I just had one today from someone and had some questions and I answer them inside of about six hours so yeah I do know a lot of people have respond to me and said hey Tom's given some great feedback however I want to tell my audience out there for those of you that are crazy it would make me look bad if you are crazy please don't contact Tom if you really are if you're not connected to reality and you're gonna you're gonna ask really really weird crashes please don't go there because it'll make me look bad and Tom won't come talk to me anymore I love talking to Michael no it's okay and I can if somebody's crazy I can figure that out pretty quickly myself well hopefully we can catch up again in 2015 life's good take care of yourself Michael is good talking what's the best way that you can support this broadcast go to iTunes and write a review and for your time I will send you a CD and DVD of trend-following extras simply write a review on iTunes and send me an email info I nfo at trend-following com include your address and we will send the CD and DVD also for those of you entering the trend-following trading world my flagship trading products including systems and training and full support can be found at trend-following comm this may be exactly what you need to take your trading to the next level once again thank you for all of your continued support a my one big pearl of wisdom do it yourself don't trust the system

[trademasterteam]

New Post has been published on TRADE MASTER TEAM

New Post has been published on https://trademasterteam.com/forex-trading-methods/ep-51-charles-faulkner-interview-2-with-michael-covel-on-trend-following-radio/32963

Ep. 51: Charles Faulkner Interview #2 with Michael Covel on Trend Following Radio

[trademasterteam]

New Post has been published on TRADE MASTER TEAM

New Post has been published on https://trademasterteam.com/forex-trading-methods/ep-239-brett-steenbarger-interview-with-michael-covel-on-trend-following-radio/29449

Ep. 239: Brett Steenbarger Interview with Michael Covel on Trend Following Radio

you are entering an investing state of mind the system doesn't want you in the truth you want answers Michael covell has them on the trend following radio network and now reaching over 130 countries and territories Michael Cavell I guess today is Brett steinberger Brett is a clinical associate professor of psychiatry and behavioral sciences at this state university in new york upstate medical university in syracuse new york he is written I think he's working on his fourth book now tons of papers out there he's got a great blog that you have to check out works also as a performance coach for hedge funds proprietary trading firms a really interesting guy definitely check out his blog hope you enjoy this conversation hey Brett how you doing good before I'm calling you today I'm thinking to myself have we spoken before we've been communicating for probably a decade but I couldn't recall if we had actually got on the phone before I don't think so you know we obviously communicated about the book and you know shared some things that way but I think this is the first in-person communication where am i reaching you this fine day I'm at home sitting at the island in my kitchen with surrounded by four cats I see a cat on your skype screen as well you got eight exactly my avatar yes that's one of our four well nice nice nice nice well i also have a problem today as i started preparing to speak with you and I'm like oh my gosh there are way too many directions we could go there are too many issues you could cover you if I go through your if I go through your blog for five minutes I'm like oh my god just make it bullet points and like okay we can go here we go here so anyways just the audience knows that I think you're you're from a 360-degree perspective we can go just about anywhere on the trading world today and I have some ideas and the first thing I wanted to jump into and I think you could offer a nice explanation to what it is and why it's important it's the idea of a flow state and I saw you describe it as the the optimal balance between the challenges we face and our level of talent and skill the flow state I started to think about Michael Jordan and being in the zone and that type of thing was I was I thinking right was that where you were headed with that what do you explain that is the flow state I think that is a good analogy and being sewn in general I think is what people mean when they talk about a flow state the full concept was popularized by a psychologist researcher of me hi she sent me high and he talked about states of consciousness in which people become fully and totally absorbed in what they are doing they lose track of time and during those states he found not only do they feel most fulfilled but they also report their most creative work and he found in his studies that this state is most likely to occur when there is a match between the challenges of a task and the skill level of the individual so that when we are challenged by something we enjoy doing but not overwhelmed by it we become fully absorbed if we're insufficiently challenged we become bored if we're only really challenged we become overwhelmed and so he proposed that learning in any discipline is most likely to occur effectively if we can sustain a stay of growth how have you see this manifested in the trading world what's a great example that might come to the to the tip of your brain right now that makes you say ah this is a good example to kind of bring this idea and connect it to the trading world the one thing that you emphasized in your trend-following book Mike was the idea of the importance of position sizing and it's something that I find that many traders don't consider adequately so for instance if a trader is taking too much risk on a trade for their ultimate level of emotional tolerance then in fact we're creating a mismatch they the challenge of the P&L straight over well as them and so they can't remain in that flow state where they will optimally process market data we're most likely to experience for when we are not frustrated and so if we set perfectionistic expectations that we won't experience whip saws or you want experience drawdowns we set ourselves up for frustration that once again can notice of that koala state let me go into you brought up risk and let's talk about risk tolerance for a second it's a topic with and so many people have come to me over the years and they want opinions on risk and how much to risk and this and that if this is not how much you should risk in whatever trading approach you might be taking of course you can go too far to one side and that's pretty easy a mathematical certainty as to where you're going but when you start to risk those small amounts it's it's such a personal choice and i i'm curious to your views about how you have maybe got people to see the idea of risk selection risk tolerance because it's it's not a one-size-fits-all well and there are two facets of risk management one is the logical side and what is the psychological side and on a purely logical sense you can determine for a given Sharpe ratio or expected Sharpe ratio what kind of risk you would need to take in order to generate a particular target return so like you say that's a fairly structured determination the question is on the logical side of how much risk one quote unquote should take is that how much risk a person psychologically can tolerate and an equally important question for the people i work with is is that a level of risk that investors are ultimately willing to tolerate well that's a whole that's a whole nother can of worms right there now because a huge can of worms like you know there is a tremendous mandate among investors to make money and not lose money and the world is not exactly constructed that way and so what happens is that a level of risk taking may be appropriate for achieving a particular target return and may even fit with a person's psychological risk tolerance but could fall outside of mandates of the owners of a firm if it's a proprietary trading firm or investors of the firm and that and that can create conflict and problems many times I find that people are most able to manage capital effectively if their risk taking is less than what might be optimal logically that by minimizing draw downs and containing them they are able to maintain a psychological state closer to the flow state that works for them and so many successful portfolio managers I've worked with are not high risk takers but they ended up being very consistent risk takers and achieve very good risk-adjusted returns yeah I think there it's it's tough though I think we're as we are bringing up the idea of investors the no risk no return though you have to you have to put your foot outside the boat so to speak you can't just expect a return for for not doing anything like you've got to put some skin out there if you want some reward that's I think too many people even astute institutional investors that maybe work with some of the largest which I'm thinking of some of the public pension funds that put a lot of money with with a sword to hedge funds around this world I sometimes really wonder about their decision-making and what is it seems to me it looks like a political crap shoot in there and often not the the most astute to investing decisions it can be political it can can be simply a function of cognitive bias I think investors many times are attracted to sent returns and so someone who's had a big year might be more likely to attract capital than someone who's had a more modest year despite length of track record but but we're also talking about we're talking is we're just keeping this conversation going about institutional investors these folks should be aware by now you know for some of the largest funds out there in the world where their alpha comes from and so if you're looking at a broad section of markets and this particular trader has a fantastic year it should not be such a surprise i just i find the i find in 2014 4 astute institutional investors to still be moved by what have you done for me lately it's kind of amazing I i'm just still shocked i would agree and they're certainly more and less sophisticated investors and and again this applies not just to quote unquote institutional investors but really anyone who is allocating a capital to someone for trading so i see it happening within proprietary trading firms i see it happening within hedge funds i see it happening within CTA's so i think of many varieties of this but it's very common to be drawn to i popping returns and overweight those and recent returns so I saw quote on your site I want to know why it was on there it was in a list of quotations famous people Mario Andretti if you have everything under control you're not moving fast enough I love it I love it what inspired you what do you like about that actually that is it's interesting you pick that up and there's one of my favorite quotes from the quotation selection on the blog recently if you're not out of control I mean obviously you can't be completely out of control in your trading and in your risk taking however we don't o Laz people if we stay within our comfort zones we have to push the envelope 27 degree to expand our boundaries to expand ourselves and so I always want to be pushing moving harder moving faster doing more and pursuing opportunities that are uncertain because those are the ones i find that lead to the greatest personal payoffs if i'm feeling completely comfortable completely in control in my personal life then I probably am relatively stable how would you advise a client that maybe you see this in their behavior they they think they're still progressing but they're just there to under control there they've almost lost that edge a little how do you how have you advise how you get people to kind of come around and maybe see that they might be stuck a little yes well it you know it gets back to that principle of what psychologists do and that is comforting the afflicted and afflict thing the comfortable and I think there is an important man for flipping the comfortable that things are going well and it's easy to take the eye off of the performance ball and so what I will look for are occasions where even within that comfort zone a trader or a portfolio manager might be missing opportunities might be performing suboptimal E and bring that to their attention aye sir I act as a kind of mirror to the trader and I heard that up in front of the traitor take a look most of the professional traders I work with have enough of a competitive make up a mindset it if you wedge them if you put them in front of that mirror and help them shut a SI show them that they are missing opportunities that they are performing suboptimal a they often will pick up on that but it takes that mirroring it takes that nudge do you find you find also even for traders and you've worked with significant traders in your career significant achievement do you find some traders even though they might hire you and bring you in and they there come it they want the they want the straight talk they don't want the the airbrushed pretty pictures do some of them still push back just some of them get to the point where they just they don't like that mirror oh my goodness yes and and I would go even further there are some who really want the training coach to augment or support their own confirmation bias and so they don't want to hear what's uncomfortable they want to that they're really looking for more of a cheerleader than a coach and that becomes difficult and there have been occasions where I've had to turn down coaching assignments simply because what the person was asking for would have required less than full integrity on my part yeah that I can see how that could happen for sure hey interesting thought here so I often see percentages it'll say well ninety-five percent of traders lose or entry is only ten percent of the success or often i will see this that a very high percentage of trading comes down to the psychological component eighty ninety percent how do you see that when you start to see those percentages tossed around what what immediately comes to mind for you well what comes to mind is the distinction between what is necessary or not is sufficient and I do believe that having a focused and disciplined mindset is necessary for trade success I don't think it's sufficient if discipline were all that we're needed or if a relatively emotionless mind state where all that were needed to succeed in trading then probably there would never be any losing algorithmic trading systems the computer doesn't have the emotions and they execute flawlessly and discipline fashion and yet we all know that those can be over fit and not perform so it takes focus it takes discipline but it takes something more and that's commonly referred to as a an edge in markets you have to be trading patterns and concepts that reflect a true and objective positive expected return and the idea that psychology is ninety percent of training maybe maybe that's true once you have that objective edge but it takes that objective edge in order to succeed so I was looking at that I think I first saw it in a PDF from Michael mobizen he used to be at Legg Mason it was a process versus outcome chart and basically you know a good process good outcome is deserved a good process bad outcome as a bad break a bad process and a good outcome is dumb luck and a bad process and a bad outcome is poetic justice process versus outcome i think there's so many folks and we've already kind of talked about this a little bit without naming process versus outcome the beginning of our conversation but so many people are fixated on that outcome that just love that outcome that outcome looks so pretty to them but boy that process just gets lost in the shuffle doesn't it yeah and what happens during slump periods we all know that there are going to be occasions even with that edge where there are a series of losing trades or there is losing period in markets people will begin to doubt themselves without their methods and will make random changes in their processes and so the drug down turns into a slump it's like the baseball hitter who strikes out again begins to doubt themselves and how changes their swing and proceeds to have several games of poor performance so I think it is important to distinguish between process and outcome and to be able to accept that at times there will be frustrating outcomes from very good processes that we're not guaranteed success drawdowns are inevitable as you emphasized in the book I remember EDSA Kota talking about you can't repeal or uncertainty pity for market outcome by accepting that and focusing on process we can stay as true to whatever edge we have in markets as possible you know I've seen this over the years and I'm not I don't know if you share the same perspective but in speaking with so many different fund managers over the years it sure seems like strategy is driven now of course in my world I've seen many many guys and ladies that have done very well as trend-following traders and then the clients come to them they see those results and they want a part of it that still doesn't make it easy for people to accept what goes along with that style of trading but I think that the biggest thing that I've heard in conversations over the years is is clients clients in the in and out of flow of money really keeps even some of the best traders on edge and and frankly the word that I want to use is worried well you know it's like because they get I think they see those that it all comes down to and I'm not saying this in a negative way because there's many men and women that you and I respect who have made fantastic fortunes and made their clients lots of money with two and twenty type fee structures but those fee structures carry a psychological burden don't they they certainly can and Ray is really a two-edged sword I've seen worry work in the favor of a trainer in terms of keeping them Queens about risk management and I've seen and act as a brake on overconfidence biases and I've seen very act as one of those frustrations that take people out of the zone out of that flow state and it becomes particularly challenging when the worries of investors ends up becoming the worries of trading firms and money managers yeah that defeats the whole purpose of of why the investor actually wanted the expertise of that of that traitor to begin with yes and I think your point is well-taken that it's one thing to intellectually accept a degree of uncertainty and potential drawdown from trading it's another thing emotionally to accept that and to be in that drawdown state and be able to stick with a sound process yeah okay Brett let me go trading 101 on you common characteristics of traders what are some of those common characteristics that you've seen your career and just kind of bling out some nuts and bolts for the audience common characteristics of successful traders I wouldn't make important distinctions between short-term traders and most notably day traders and longer term traders most notably investors there is a very worthwhile book that I'm sure you're aware of pop Thinking Fast and Slow by Daniel Kahneman and my experience is that comment ideas are important but there's a large distinct an important distinction by legislation between slow thinking deep thinking and fast thinking quick have a recognition the shorter the time frame of the market participant the more I see fast thinking and quick pattern recognition as essential to success the more I see longer time frames and investing as important to the trader at the more i see the soul thinking the deep thinking the explicit analysis as important to success and of course there are hybrids and there are people who I've known and worked with who have skills on both sides of that but I think there are important skill differences between the short-term trader and the longer term market participant that being said I do find some personality commonalities one of the personality traits that is emphasized in your book and in the Big Five research as it's called is conscientiousness conscientiousness is attentiveness to detail process orientation if you will with responsive a sense of responsibility and people who are high in conscientiousness or detail-oriented who are very focused on responsibility end up being more reliable followers of a particular edge or particular system then people who are low in conscientiousness who can be impulsive another dimension that ends up being relatively important it's emotional stability or sometimes I have the opposite called neuroticism people who are relatively steady in their emotional makeup versus people who have lots of emotional ups and downs and it's easiest to make decisions under condition risk and uncertainty if your flight and fight responses aren't roiling and what I found is that either successful traders have this emotionally steady stable make up or they find some mechanisms to provide them with a high degree of conscientiousness so that they can be very detail-oriented and responsible if they don't have their feet on the ground if they aren't grounded in a state where they are relatively study emotionally and relatively reliable in their performance of the awesome j biol whatever tells your skills they may have with consistency and that brings me to the last characteristic and that is underscoring one of the findings from Jack Swagger's research but that is that successful money managers are very different from one another in their personalities and in their trading styles but we most often find that the successful money managers are trading in a fashion that is consistent with their personality strengths they have some area strength that they find a way to manifest to express who before trading and so the person who is a quantitatively oriented and analytically skilled might have very different strengths than the person who has that fast thinking how to recognition but each flies our way through their trading to be who they are in terms of those serpents a kind of an outside the box type question and given your background and given the epidemic overuse and misuse of prescription drugs related to the mind where are we headed in that place it sure seems like that we've passed the threshold of those people that truly need medical help and we're at a point where a lot of a lot of issues of the mind are being treated pharmaceutically are we in a good place in society or wow it's a really really good question as you know I have an edge from a clinical faculty appointment at the Medical School in circles New York in the department of psychiatry I'm a psychologist the clinical psychologist myself by training that work closely with my colleagues in the department in psychiatry and I've really seen both sides of that issue I see people with wife one debilitating the question or anxiety disorders benefit tremendously from the appropriate medications it really is turn their lives around and I've seen he thought who have been overly quick to turn to pharmaceutical solutions that in fact other ways of dealing with behavioral based website including children could be found and I habit-forming medications that can be quite dangerous that end up being prescribed I've seen this with the minor tranquilizers the benzodiazepines that people will take to calm themselves down or help themselves sweet and for a very temporary basis they can work but you used to access over time they create in warri dangerous levels yeah hey one more quote that I saw on your site that I love from Bob Knight and here you are putting Bob Knight a lot of people say you can't quote Bob Knight come on Bob Knight your biggest opponent isn't the other guy it's human nature oh I love it love it love it and I am a bob knight fan I admit it publicly and way you know we all have our moments and we have our flaws but you know what I think coach Knight really exemplified was the importance of teaching as a coach and the importance of preparation the drive to not just win but to prepare to win and human nature is such that we like to avoid effort we like comfort and as I was mentioning before we don't really grow we don't expand certainly not as a basketball player unless we push our limits and so human nature keeps us out of the gym it keeps us away from practice it keeps us for researching markets and for developing fresh sources of edge and that's something that's important to push past it was kind of comparing the idea or contrasting or just getting people to think about two different strategies of trading which is trend trading versus a mean reversion and the floor is yours where did you want to go with that well you know it's really interesting because to get back to our earlier point many times traders and trading firms and investors have trouble tolerating drawdown and so even though they may end up conceptualising a mackerel market in terms of trend they find themselves unable to fully participate in that trend and trade with that trend because the trend always involves some degree of retracement and so what happened is ironically is that people who will talk in terms of trend and think of their trades in terms of trend will end up trading in a way that what's more mean reverting so to speak and as a result your participation in any trend FS is suboptimal one of the cornerstones of just my own thinking about markets it is a philosophical tradition called contextualism contextualism emphasizes that events are the result of context of situations that we are in and there are situations in markets that lead to more directional purchase order exual persistence and there are situations of markets that need to less persistence of direction and we call those situations regimes there are stable market periods in which patterns within markets will persist and then change with the changing economic commission is changing social conditions and so forth and so I'd like to think of trend not only in terms of Christ movement the trend in terms of regime persistence that regime that we are in currently if we identify a stable real regime that in the short one tends to persist now that persistence of regime may or may not implicate directional persistence of price movement you could have a needle averting pattern that is part of a stable regime that itself will persist over time and so the trends that you're trading in that situation is not trend of Christ movement but trend of regime if that makes sense so the bike respective trend following is a broader concept of more encompassing concept and a more important concept and simply whether markets will go up or down day after day after day yeah I think you are perhaps inadvertently bringing up and even more important issue which is definitions in the quote trading and market space and I think maybe maybe you and I should start this we should find a URL and just call this this is the agreed upon definitions I don't think it would ever happen but I mean there's so many terms get tossed around with different meanings and one of the ones that I've seen recently that's hotly debated is a trend following and momentum trading getting put into the same kappa now I'm having to go read some of those momentum papers to see exactly what they're talking about so there's there's this a terrible amount of I think we all want to be on the same page we're not all trying to use different terms to confuse each other but I think there is a heck of a lot of confusion out there yes and I have a lot of emotional attachment to terms like momentum or terms like value and the discussions ended up being more ones of ideological affiliation than real understanding yeah it's true this is true well I mean somebody could somebody could criticize my world and say you do that for trend-following what I have tried to do though is fine particular traders that often weren't associated with each other trading in similar ways making lose money in the same months which I thought was terribly unique data to have and to analyze I think sometimes with bigger terms like value it's you know you could say well Warren Buffett is a value trader and Seth Klarman but these guys don't behave necessarily the same way so it's it's it's a little bit tricky or some of the broader terms I think well you're raising a great point like and that is that how people actually behave and how they describe their behavior can be very very different things and and that's the be government of every psychologist yeah yes when you really investigate what people do visit this is true in the psychotherapy research what people do as opposed to what they say they do you see some very important differences there's a third traditional psychotherapy called an integration perspective in which they look at what the common characteristics are of good therapies so if you look at successful therapist what are they doing in common even though some might say they're behaviourists and some might say there are 40 and some might say they're a humanist what are they doing similarly that might account for their positive outcomes in turns out there are common effective ingredients of therapies and I suspect as you're alluding that that's true port ratings well yeah I've seen yeah I've seen people that want to describe themselves as in certain terms and they're very honest and accurate and then other traders that just don't want to use the term that would best describe them and I often just figure it's for client purposes or marketing purposes because it's clear they're doing what they say they're not doing right right yeah hey Brett where's the best place for people to check you out follow along you've got some really cool posts motivational type things also as well on your blog where's the best place for people to go beyond Amazon where they can buy books and you are working on the fourth book is that yes work out of work look I also look light but the trader feed blog trad erfe ed traitor feedback blogspot com it is really where i post dated their ideas and share and use as a kind of sketch pad for the ideas that end up going into the books all right yeah i think i think for guys like me and you they've been online for a long time we do something similar in that I I call facebook and twitter my own personal Diaries I don't necessarily even care that other people like it or whatever it's whatever interest me and how I want to keep track of things and that's how I use it well it's interesting you bring that up one of the areas of research that fascinates me is creativity and creativity in successful trading and the thinking aloud process talking aloud writing thinking about processing information explicitly and then reading or listening to what you have said ends up being one of the techniques that can lead to fresh perspectives and creative outcomes yeah I feel fortunate to have started this podcast two years in and several hundred episodes and I'm lucky and talking to you and so many other people that have come on it's it's like going to never ending school with very very bright people it's quite fun yeah it's fun and it's a tremendous resource that you've assembled on there some really top people there over 230 podcast I noticed and think of each podcast is a kind of prism you're putting on a different set of lenses so to speak so that you're seeing your goal from a different angle and eventually with enough good people giving you enough good lenses you start to see some fresh angle some fresh directions that's what leads to those creative insights and promising directions in trading or in other areas love yeah I think you're spot-on about that I think you're spot on getting fresh perspectives in different perspectives not just necessarily the same voices and listening to different people say it may be a common or even a dissimilar just that just listening to different people explain themselves their their cadence their tone I mean I'm still the same guy but I get to hear all these different ways it's it's fascinating i love it yes i'm thoroughly yeah hey Brett listen hopefully we can talk again in the future and thank you for coming on today I appreciate well thank you for having me i really appreciate it and good luck in your future podcast excerpt up soon okay bye-bye coming if you want to learn how to be a trend following trader the first place to go is trend following calm my firm can help you with educational research and systems trading packages to get you started immediately take advantage of my 15 years of experience take advantage of all the insights that I've accumulated and put into one research and educational package these are systems that you can use immediately to start making money once again go to trend following calm