If you are day trading and only trying to learn how to trade trends, then you are going to fail 100% guaranteed.. Trends are just a small part of trading, and if you don't study the rest of the market then you are toast.. The odds are against you.. Whether you believe me or not, this trading game was design to take your money.. You are going against the smartest people in the world.. Scientists, mathematicians, billionaires and etc... Do you think your $20 book that you bought from amazon is going to save you? Give me a break! Now back to the trend.. If the trend is my friend then how come it only shows up 30% of the time? What kind of friend is that? Call me stupid, but I don't want a friend like that.. In trading you have to learn about more than trends in order to survive.. The market is always trying to screw you over and trap you so you have to become aware of this.. There are 7 main things the market is trying to do constantly. Maybe not every single day on one instrument, but you will see it throughout the whole market.. And this is one of the reasons why the market is hard to trade because the market doesn't act the same everyday... The 7 things are 1) short/long squeeze (fake trends), 2) consolidation, 3) range, 4)strong trends, 5) semi trends, 6) breakouts, and 7) reverses... I'm too lazy to explain every single one of these so you will have to study them yourself The market loves to trick you into believing that your ONE system is going to make you money.. And then 3 months from now your ONE system is going to stop working and I wonder why? Is it because you was trading a trendy market and now it's not trending lol.. The best way I found to trade the market is to wait for the market to be in a predictable state.. Yes, a predictable state.. What does a predictable state look like? When the market is bouncing off extreme levels is what I call a predictable state.. Trend lines, s&r, and channels... Yes, I know they are hard to draw in real time for most people, but guess what? It's supposed to be hard.. If it wasn't then the game would be easy, and the big boys wouldn't like that.. The best thing I can tell you is to practice everyday in real time and in non real time.. It took me 9 years to see what's really going on.. and I'm still learning Now, I'm not here to beat down trends because you can make a lot of money from them if you know how to hold onto winners.. But the real trends only appear 30% of the time.. Most people get confused and think that a temporary direction is a trend.. But real trends last for the whole day.. If you are a struggling trader, and you always get caught in chop, then you will need to stop trading and get familiar with the 7 things above.. Plus, you will need to get familiar with trading predictable states...
> The TREND is your friend.. The biggest lie ever! Longtime site sponsor Mike Covel would beg to differ...
That's encouraging. I'm on about 6 years full time, and every move is still a surprise like it was on my first day! I heard DBPheonix the other day say that if someone hasn't 'got it' within 6 MONTHS they should quit, which was disheartening! lol
thanks for sharing the wisdom of experience. I'm a few months into fulltime day (& swing) trading. I find, It is easiest to let a program , some automated trading, handle the trend skimming (I assume most trade workstation software does that) , sees the trend , buys with a tight stop loss (and I get stopped out 2/3 of the time) and on the true trend up , trails the stop-loss so it becomes a profit taker .. The rest takes a human brain. I'm doing $200+ a day being very conservative. There are additional opportunities if you expand into swing trading. On the day of the flash crash I bought FB for $78 having followed it for years .. my program had favorites and buy prices built in, it brought up FB and I bought 500 shares... and it never occurred to me the market could crash or go lower. I bought SHAK at $37 , my program saw the rise from a few dollars lower. I bought it and again let the program decided the sell point around $77. Once in a lifetime luck I think. I knew a lot about TWTR and saw the price under $26 as great and did buy 500 shares knowing I'd have to hold it for weeks (guessing). The price dropped and then I bought another 500 more at $24.60! I knew the price would soar simply on the announcement of the CEO .. and I wrote myself a note... don't sell for under $31 it may go higher.. So I set the program for that and took the decision out of my hands... several times when the price stalled at 28 or 30 I wanted to sell .. but waited and sold at $31 ... now it's even higher. Many stocks bounce up and down in certain ranges (NFLX) and < it seems to me > that knowing it well you can buy and sell near the extremes ... however I do realize that the price could fall and never return in some cases... so a stop loss is still necessary... I see mass buy and selling near the end of the day on certain stocks and the price varies by $1 or more in a pattern nearly ever day, I assume that it is computer programs trading. I'm new to day trading (3 months) but been an active trader for years. in my program ... a trend is triggered by > 3% in a direction in a timeframe with some volume .. and I look at the history to see if the trend can be extended in the historical ranges the stock has reached ... noting reversals ...support and resistance levels (most stocks on most days are not trending according to that measure in my review of the data each day) I agree, almost every day is a surprise .. and my instincts are usually wrong .. so I'm automating some of the decisions ... I lose more profits by being tight than I do on reversals. .. I do know that I want to be on the trend side .. not opposing.
Interesting post. Thanks for sharing. Broadly agree with categorization, but please could you explain a semi trend? Is that what others would call a weak trend, or do you mean more of a choppy trend? Do you decide which state the market is in using a discretionary approach or have you mathematically defined rules to determine each state? And isn't the market trending 100% of the time...with respect to some timeframe? (Of course, I'm just talking semantics here!)
The trend is the easiest money in the world for day traders. There's usually a trending move at least once a day. Just wait for that "30% of the time" and do the opposite of what you "feel" you should be doing (catching a reversal because price has run too far). In the words of Al Brooks: "If you want to compete, you must minimize all distractions and all inputs other than what is on the chart in front of you, and trust that if you do, you will make a lot of money. It will seem unreal but it is very real. Never question it. Just keep things simple and follow your simple rules. It is extremely difficult to consistently do something simple, but in my opinion it is the best way to trade."
I think it's good advice. All the books I read made me much worse than during my first month, when I wouldn't do anything unless I knew it was a slam dunk. The illusion of knowledge is dangerous. The Market can fake you out in the short term but longer term outcomes (compared to day trades) can almost become inevitable, like the aftermath of any parabola, or a stair step then huge launch with several multiples of the average daily volume, etc. Waiting for setups like these can take days. It's all the "filler" trades I've done to pass the time that cost me the most.
The problem with so-called holy grail Trading Rules...is that people sometimes take it so literally, and follow it devoutly religiously like a braindead zombie sheep robot. Trading (successfully) is part Art, part Science...you have to realize and feel and understand that. make love to the market...and understand it...like it's your soulmate. don't have multiple lovers; have only one...trade one thing...and Understand it on another level.