Trend Following – Michael Covel Video

by Olivier on May 5, 2009

One of the authorities on trend following is Michael Covel.
This video outlines timeless rules on what to pay attention to.
A few questions he covers are: When do you enter a trade? When do you exit a trade?

There are no exact answers as to where exactly one needs to exit a position. I sometimes put in hard stops but I also use mental stop losses because I am in front of the screens during market hours and can react accordingly. I rarely have an exact price point where I plan to exit. I like to see how a stock acts and if the original reason for entering a position is still valid. As soon as the reason why I entered is not valid anymore I exit.

So what I am looking for is if patterns are still valid. Is the pattern pressure still there? Is the volume pattern still supportive of my initial analysis? Has the trend changed? Basically I am more looking at price areas to hold as opposed to watching a specific price. I try to stick to winners as long as the trend hasn’t changed. What it all comes down to is to be disciplined. Once the stock is not meeting your criteria anymore exit the position.

You can read more about trend following over at the Darwinian Investor. Here’s an interesting article about Salem Abraham on trend following Danny Merkel has written.

Have a great evening!

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