Pod Insights Michael Covel's Trend Following Ep. 1391: The Biggest Balls of Them All with Michael Covel on Trend Following Radio About this episode Please enjoy my monologue The Biggest Balls of Them All with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive.
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I'm MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I'm proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show.
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Transcript 0:00 Speaker 00 I happened to see the other day some random post from a professional baseball player. Still in the minor leagues, got paid when he got drafted. I kind of have followed his career from a distance. And his posts on his ex account, I just randomly spotted these, were him praising some day trading guru. And this day trading guru had a screen up with charts everywhere, indicators everywhere. Just the consummate bullshit that you see everywhere. And the funny thing is, this is pretty normal. Technical analysis is pretty normal these days.
0:42 Speaker 00 Normal in the sense that a lot of people think they know what it is and think it's useful. Now, I've always said there are two forms of technical analysis. The predictive kind, which is the folks that put charts up and they tell you that, based on this pattern or this squiggly line, this will happen the next day or the next week or whatever. And then there are trend following traders who just say, "Which way is the price going? And I'm on board either direction." Which is a reactive form of technical analysis. These are very different approaches. I once gave a presentation at Market Technicians Association, I'm not sure the exact name. A fairly big group in New York City.
1:26 Speaker 00 Maybe there was like 500 people in the room, 600 people? And I asked for a show of hands at the end of my presentation, how many people were familiar with the trend following that I just described? I'd say 10% of the hands were familiar. All of the people in that room were preoccupied, in love with, fooled, suckered, whatever you want to call it, by predictive technical analysis. I can apply these technical rules to any market at any time and I will have success. It's the biggest bunch of unproven bullshit. That's what just strikes me. There is zero proof in this.
2:11 Speaker 00 Now I find in this little world that I happen to exist in, trend following, there is proof. That was the only reason I was able to write the trend following book back in the day and all the additions that came after it and the other trend following books. Is because I could look at these track records and I had proof. There was proof that went along with my words. For anyone, that's a good feeling. Now, on the other side of the equation, no one seems to give a shit. If some knucklehead puts a chart up with a bunch of squiggly lines and a bunch of indicators
2:51 Speaker 00 on some one random market, even somewhat intelligent people will think there's something there. They will get on board. It strikes me that we live in a grand, grand unusual time. Because I'm looking at a track record right now in front of me. It goes essentially from 2003 to 2026. In 2003, that was a approximately, I'm going to approximate these numbers, approximately a 30% return. 2008, 108% return. And a 45% return in October of 2008. Go check out what that means.
3:35 Speaker 00 But if we bring it up to current and we look at 2020, up 18%. 2021, up 32%. 2022, up 89%. 2023, up 51%. 2024, up 82%. 2025, minus 10%. Oh my God. Shit's going to break down. 2026, the first four months of the year, up 105%. That is not a predictive technical analysis track record. That's not squiggly lines. That's not predicting a damn thing.
4:17 Speaker 00 That is classic high vol trend following trading. Period. That's not one market that is a diversified basket of markets that this trader is following, waiting for a momentum indicator of price action to tell him when to get in and when to get out. And of course, he's got solid risk management. If the trades go against him, he's getting out. Period. Now, this is not a $20 billion fund. It's approximately 500 million. I think roughly.
4:57 Speaker 00 This fund has had steep drawdowns, 60% largest drawdown. But if you're out there and you know anything about the markets, if you know anything about trend following, and you want to get the kind of returns that I'm rattling off, you don't get those without taking risk. It just doesn't happen unless you've got some kind of unusual slippery angle. Now, look, a lot of people hear that a trader is up 100% in 2026, and they say to themselves, 100% in four months? I don't want that. That's too much for me. You know what that is?
5:41 Speaker 00 That is the boomers talking because the boomers had no fucking problem with all of the market wizards in the 80s and the 90s. They were producing these exact same fucking returns. The returns I just rattled off are pure market wizard returns. 100% market wizard returns. This is what the Sakotas and the Heitz and the Koverners and the Soros's and the Jim Simons, this is what they were doing. They weren't shooting for 5 or 10%. After 2008, a fantastic year for trend following traders. The rest of the world woke up, so to speak.
6:24 Speaker 00 And those big piles of money, retirement accounts and sovereign wealth funds. They heard about this trend following and they started knocking on the doors of trend following traders. And they said, let us in, let us in, we want a piece of this action. You guys made all this money in 2008, we want in. Well, they poured in, but guess what? That money doesn't want 100% in the first four months of 2026. That is old boomer money. And they don't want market wizard returns from the 80s and 90s anymore. So they dial that shit back. And these trend following traders, some of them fantastic traders with long track records.
7:08 Speaker 00 A lot of them said, well, shit, we'll take all this money, we'll throw a management fee on it. We're going to make a boatload from this and you know what? I don't knock them at all. I'd do the same damn thing if I was in their position. Who won it, right? But here's the thing, I'm interested in talking about trend following. I'm interested in talking about why it's good. And what are the pratfalls and whatnot, all that kind of stuff. Well, you start to have regular people seeing these very large trend following funds that were forced to trade in a way that the money wanted. The money did not want the kind of returns that I was just rattling off for you. The big money wanted, hey, make a 7% on the year or something like that. And so everything got dialed back.
7:54 Speaker 00 The problem with that is if you are a classic trend following trader, you can't really, if you're going to be a trend following trader, dial it back. Because if you dial it back, you're giving up the essence of the strategy. Because it's not going to always go up. For example, the trader I'm talking about today, up 82% in 2024, down 10% in 2025, up in 2026, 105% in the first four months. Does that mean he will finish the year up 105%? Who the hell knows? But the point being is that you can't just give up.
8:37 Speaker 00 Returns that the strategy would otherwise produce because somebody says they want lower risk or this or that. I mean, you can do it. But you want the cushion. You want the cushion of the big returns. That's the entire strategy. It's a strategy for getting rich. It's not a strategy for fucking competing with money markets. Trend following is a strategy for getting rich. Now, back to the predictive technical analysis. The guy that I'm talking about, that returns that I'm talking about, those don't come from any of this crap that you see on YouTube or X. Here's the strange thing about it, though, too. Have you ever met one of these technical analysis junkies?
9:20 Speaker 00 Who think that they are possibly being suckered? God, no. They all think because they're so damn smart, they've seen something work in the abstract, on one market, on one day, and they become convinced that some freaking technical analysis strategy can be applied to every timeframe, every market, every day, at any moment, and produce money. It's batshit fucking crazy. And guess what? There are no track records to back this shit up at all. Zero, none, nada. I get it. If this is fun to you and you love the predictive technical analysis,
10:02 Speaker 00 you know, you get off on it, you know, you want to imagine you're some kind of master of the universe and you've got it all figured out and you've got the squiggly lines on your computer. I mean, I guess, whatever, get your rocks off. But if you want to go down the path of a technical strategy, something like trend following that reacts to market movement, you could throw most of that shit away. Look, one of the classic lines. That you can find in the trend following writing, going back decades, if not 100 years, is the whole idea of lengthening your time horizon. Meaning, well, I can trade daily bars, not even look at the market during the day,
10:45 Speaker 00 or I can trade weekly bars, not even look at the market during the week? How can that make money? How can that make money? Well, if you don't know how that can make money, maybe you should fucking stop. And you don't know how a weekly bar can make you money? Maybe you should slow down. Stop taking the crack. Get off the fentanyl. Stop drinking 20 beers a day. Stop playing video games. Find out how you could actually do it. Because who in the hell in their right mind wants to sit at a screen all day? That's not the life objective that any of us want. Now, I'm not trying to stop you from doing that. If you want to do it, fine.
11:30 Speaker 00 I just think it's weird. The trader that I'm talking about today, I first met in 2005. Because after my first book came out, I randomly texted maybe like 15 of the biggest funds that I could find, mostly trend following funds. Toby Crable was one of them, but he's not trend following. But I texted like 15 of these funds and it was like in aggregate over 15 billion under management. And 12 of them agreed to meet with me for an interview for a potential new book. And the trader that I'm talking about today, I met with in 2005. I've got that interview on tape somewhere. I've never released it.
12:11 Speaker 00 I remember it being quite boring and kind of dry. And he was just getting started at that time. Maybe he only had a four or five year track record, not much. Probably not that much money under management at that time, but I still wanted to talk with him. I was in London. Why not? Well, I ended up featuring him in my little book of trading, which came out. Cool little book, interview book. And he just kept cranking along, you know, all the way from 2008 until today. And he did give me a lot of great information for my fifth edition of trend following. We talked about how 2008 had unfolded for him. That book came out in, I think, 2016, 2017.
12:56 Speaker 00 And stay tuned, a new edition of that is coming. The process is underway. But I tried to get this guy to come on my podcast for a long time. Very friendly with me, but he finally did come on. And a great interview. I implore you to listen to his interview. He is Joe Friday. He is just the facts. He is a numbers guy. He understands the data. He understands trend following. Not unlike Dunn Capital. He has become the, in my mind, one of the go-to track records. To see somebody who seems to be having a bet with himself about how far he can take trend following in his life.
13:39 Speaker 00 Meaning he doesn't seem to be influenced by what other large funds have been influenced by. You know, dial it back, do something different. The trader that I'm talking about today seems to be willing to stick with it for the duration. And I think he's in his 50s, so he's got a lot more time to go. But I just find this kind of a track record. And look, he was up 24% in April, 5% in March, 21% in February, 28% in January. 105% on the year. Now, again, I can't tell you he's going to end up 105% in the year. And I'm sure if he was on this call right now, he would probably say,
14:24 Speaker 00 "You know, Michael, there's a possibility I could end up flat on the year." That's trend following. Now, I doubt it. 105% going backwards, even if you had a 30 or 40% drawdown. That's going to be tough to go back on. So he's probably going to end up with a pretty good year with that kind of a start. But do you see this unusual dichotomy here? This contradiction in a way? All of these people that have been seduced by the freaking charts? The pro baseball player that I was talking about? Anybody and everybody? The guys on YouTube that slap up a chart, throw some indicator on there, they start talking about what it means, and everyone just goes, "Yeah, yeah."
15:07 Speaker 00 And then I look at a guy like I'm looking at today and his track record, and he's got none of that. Zero, zip, not a bit. Just trend following. And I'm looking at it right now. I'm looking at the monthly data points from 2026 all the way back to 1999. And I can just sit here, I'm just staring at a table of numbers. Each month, going back all that time, there's no stories, there's no CNBC, it's just data that was produced from having a diversified trend-following track record, not knowing
15:46 Speaker 00 which market would do a damn thing, but being ready to go with the flow on the markets that did take off. I'm sure if we went through his annual returns and we reviewed his trades, the ones that make up the money, the big money that he made, we're gonna find it was different all the time. That's how life is. You wake up and you don't know what the hell is gonna happen. He had one stretch from 2015 to 2019 atrocious, a four or five-year underwater drawdown, but he stuck with it.
16:26 Speaker 00 And now, his cumulative return since March of 2002 is 8,591%. 20% a year after fees. It's one of the great track records of all time. It's not Ken Griffin or Jim Simons in his heyday with a staff of hundreds of PhDs. This is a very small shop that I'm talking about today. This is pure trend following. And you know what? That's the most exciting thing about it. He's producing these returns in the face of the competition being 300 PhDs. That's fucking awesome. That's so cool.
17:12 Speaker 00 It's the same feeling I've had about trend following ever since I learned about trend following. You could be outside of the whole damn system and make it happen. That's a beautiful thing. It's the ultimate entrepreneurial trading endeavor. It really is. And I'm not knocking Jim Simons or Ken Griffin. Look, if we all ended up in Ken's shoes, the strategies that he employs, the wealth that it has created, hell, we'd all take it too. But sometimes those things are unique. And they're not repeatable. Where are all the duplicate Ken Griffins? Where are they? You can always find duplicate trend following traders.
17:56 Speaker 00 Because the strategy roughly doesn't change, because people roughly don't change. And if people don't change, trend following is going to keep working. And so far, it keeps working. Now, I guess it could just, at some point in time, go flatline. But I haven't seen it. I'm sure, or you have heard of, the research that takes trend following back 100 years, 200 years, and 800 years. Three large funds, they went back and they looked at trend following going back centuries. It works. It doesn't stop working. The trader that I'm talking about today is Paul Mulvaney. I do recommend that you check his work out. Check him out. You can find him on this podcast, just do a search.
18:38 Speaker 00 But think about what I'm talking about today, the next time you see somebody with their predictive technical analysis charts, and their squiggly lines, and their candlesticks, and whatever fucking bullshit that they've got. I mean, if you're just a degenerate gambler, I get it. Go for it. A lot of America these days, degenerate gambling, I get it. But if you are a thinking person, if you're a person that wants to manage your risk, get rich over the long term, hopefully, hopefully, I've said some things today that make you pause, make you stop, and say, you know what? I better dig in. See you again next week.
19:26 Speaker 00 I see a time when those awake will understand how to make money in up, down, and surprise markets. Whether a new trader or experienced, college student or financial advisor, protecting against a crash or just trying to make a lot of money, trend following offers everyone an answer in uncertain times. To get started immediately, send me an email, [email protected] . I will send you the right trend following steps to take along with my free video. But if you want to buy and hold, trust the government and trust Wall Street, this is absolutely not for you.
Previous Ep. 1390: The Psychology of Persuasion with Michael Covel on Trend Following Radio Next Ep. 1392: Good People with Michael Covel on Trend Following Radio Page updated November 6, 2026 · transcript and summary are machine-generated
