The Little Book of Trading teaches the average person rules and philosophies that winners use to beat the market, regardless of the financial climate. The market has always fluctuated, but savvy traders know how to make money in good times and bad. Drawing on author Michael Covel’s own trading experience, as well as insights from legendary traders, the book offers sound, practical advice in an easy to understand, readily digestible way. The Little Book of Trading Shows how traders who beat mutual fund performance make money at different times, not just from stocks alone. This book explains why mutual funds should not be the investment vehicle of choice for people looking to secure retirement, a radical realization highlighting the changed face of investing today.
Author’s Introduction:
BEN STEIN FAMOUSLY SAID, “IF YOU DIDN’T LOSE A LOT OF money during the Panic of 2008, you were probably doing something wrong.” I heard those words and wanted to scream. His view could not be any farther from the truth. People made fortunes in 2008 with solid moneymaking strategies. The winners were not doing anything wrong, they just happened to have had the vision to prepare for the unexpected and when the big surprises unfolded—they cleaned up.
Investors have been conditioned for decades to believe that they cannot beat the market. They’ve been told to buy index funds and mutual funds, listen to CNBC, and trust the government. I have news for you. That does not work. We have all seen one market crash after another for the last decade. But the powers that be keep telling us that the old investing ways are the only way. Deep in our gut we know it’s not true. Even if we don’t know who the winners are, there are winners in the market, especially in the middle of a crash.
I am going to introduce you to a way of thinking, to a way of making money that is entirely different from what you have been taught. It varies vastly from what you have heard from the brokerage firms, the media, and the government. First of all, you can leave fundamental analysis at the door. A lot of people are taught that fundamental analysis—knowing a company’s financial statement backwards and forwards in order to know where to invest, and crunching numbers until you’re blue in the face—is the cornerstone of investing. Well, you do not need to know how great the demand will be for the next Apple iPad. You do not need to know how far gold will go up, or down, or why. The only variable to understand, so you can make money, is to know which way the market is trending, and if you are on board, up or down, you go in that direction.
This book is all about trend following trading. Maybe you’ve never heard of it. Trend following is real simple. Pretend you have no idea which way a market will go or for how long. Trend followers simply say that if Apple is trading at 300, and it starts to go higher, they will buy Apple. Why would you do this? If Apple is going up you want to be on board. Period. No one knows how high or low Apple may go, but if it goes from 300 to 400 you don’t want to miss out—even if 300 feels like too high a price to buy in at. Buying low or cheap is not the goal.
The greatest thing about trend following is that you do not have to know anything about oil. You don’t have to know supply and demand for next week or next year. Trend followers don’t care. If the market is going up—you buy. After you buy, if it goes the other way and you start to lose money—you get out. How do you know to get out? Trend followers abide by certain universal and time-less rules that go way back. One major rule is accepting when you are wrong in the market and getting out. You need to be willing to lose a small amount of money if the trend does not go your way. The key to keeping that loss as small as possible is admitting defeat. This is how you preserve capital.
Contents:
- Stick to Your Knitting
- Someone’s Gotta Lose for You to Win
- No Guts, No Glory
- In a Land Far, Far Away from Wall Street
- Think Like a Poker Player and Play the Odds
- Stand Up, Dust Yourself Off, and Keep Going
- Throw Away the Fundamentals and Stick to Your Charts
- Study Hard and Get an A+
- You Can’t Know Everything
- Make It Work Across All Markets
- Stay in the Moment of Right Now
- Sing the Whipsaw Song
The Little Book of Trading: Trend Following Strategy for Big Winnings By Michael W. Covel pdf
