The Little Book of Trading by Michael W. Covel

Author:Michael W. Covel
Language: eng
Format: epub, mobi
Publisher: John Wiley & Sons, Ltd.
Published: 2011-07-03T16:00:00+00:00

It All Starts with the Tedious Grind

Harding is bright. No doubt. He graduated with a degree in physics from Cambridge University, but without the requisite hard work, a degree like that doesn’t make him a trend following winner today. Plus, last I checked, physics is physics. It was not a degree in trend following.

Early on, Harding devoured technical analysis books and saw the benefits of trend following, but he quickly realized that he wanted scientific analysis in his trading.

He originally started at someone else’s firm to learn. “I went there because I didn’t want to sit in an investment bank and make money. I wanted to know if you could do [trend following] from outside the markets looking in. ‘Could you be on a desert island and make money trading?’ [That] was the question I was asking myself.”2

That kind of question was only going to be answered through hard work. Imagine yourself spending every day drawing hundreds of charts by hand. Harding did. He bound every chart into big leather folders. It became his leather bound book of charts so to speak. Why do this? Research! If you believe that all markets can be made the same through the analysis of their price movements, then you have to prove it to yourself too. You have to do the homework by staring at the price data and staring at the charts.

Harding added, “The only thing I ever wanted to be was a quantitative trader, because I think like that. Just like a violinist needs to play a violin, I need to take a quantitative approach to markets. I’m only interested in the maths.”3 (“Maths” is the very British way to say it.)

This is not new, however. Investment success and maths have been hand-in-hand for centuries. It is not something that just happened suddenly in the late twentieth century. Today may be a golden era for the two to work together with the explosion of computers and globalization, but using rules that allow you to count is anything but new when it comes to making money.

The two great waves of our time opened up huge opportunities for traders to do clever things. Investing globally around the world with math and computers, and pursuing more trend trading strategies, are just a few of the advantages.

Think about it. If you are looking at many markets, and you have rules that require constant recalculating and monitoring, is it really a shock that there are many more opportunities to make money in global markets as opposed to just 20 years ago? Said another more pedestrian way: Trend following is the only style of trading that you can operate out of your bedroom. It is the only style of trading that doesn’t require you to stare at a monitor all day. Those are not small differentiating factors!

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