The truth about the Turtles
Art Collins: Discuss how you became a
trend following advocate.
Michael Covel:
Going back a ways, even before Richard Donchian, some very bright people started
to realize that the whole notion of having all the fundamental data in the world
didn’t address the most pertinent questions. You still have to decide, when
exactly do you enter, when do you exit, how much do you bet, and what will your
total portfolio consist of. Those kinds of questions don’t get answered just by
having all the fundamental facts in the world. Many trend followers tended to
arrive at their understanding independently of each other. They were scientific
in their approach and they knew they had to come up with a method that would
answer those kinds of questions.
Interestingly, after my book came out, I found
myself giving advice to otherwise sophisticated people who don’t “get†trend
following. I sat down the other day with a very large hedge fund that was
closing in on a billion dollars with just a small select group of principals.
They were more comfortable making an allocation to a fundamental trader trading
one market alone. They just couldn’t wrap their arms around the idea of trend
following being a skill set that works across all markets. I’m getting that kind
of response.
Art Collins: These are valid arguments
regarding the downside of fundamentals, but why do you advocate trend following
in particular instead of some other technical approach?
Michael Covel:
Tell me another technical strategy where you can find over a dozen traders with
similar trading methods and (profitable) records, month by month, over 20 plus
years. There has been a group of trend following traders with consistently good
performance results over a very long period of time. You can look at that data.
That was the nexus of my book—