Discussion in 'Trading' started by crgarcia, Dec 1, 2007.
Since most of the time, markets are ranging, not trending?
Trend in what timeframe?
In a particular timeframe, trends are closer to 30%.
I don't recall where from but I've seen that 30% (and less) number as well.
silly theoretical question. on smaller time frames (several weeks) very often by the time trends are noticed they are no longer trends.
and on larger time frames (years), trends usually have so much noise to make this question relatively moot.
take crude oil for example. Long term trend is obviously up. But what is the short term (leverageable) trend? It might still be up (a dip in the bull); it might be going back to 60-70 very easily.
Same thing happened in wheat this year -- trend took a month or two to play out; then the market topped out. any trend follower (like i tried to be) lost his ass buying wheat anywhere in the $8 range.
And the reality is, by the time most noticed the bull trend, most were calling tops against historical ranges [ie for crude, shorting around 78-95]. The truth is the trend took all of several weeks to play out in the short term.
Quite a conundrum.
Place your bets -- but these types of blanket statements about staying on sidelines have little context in the reality of the markets.
Better yet, tell me -- what type of 'trend' are we in in equities? I could say on the long term we are still uptrend in most of the major indexes, short term being a downtrend that may still be in or finished?
This might be a perfect short on ES (if we are to get another retest of 1370)--- or it might be the perfect buy for another move up.
And what about when things were dismal at ES=1410 the other week. Short term trend was obviously down. How did trend following work there?
Or you could argue the markets are range bound. So fine; don't buy ES until hit breaks out to 1580+. But then watch again as it gets sold back down.
More often than not trend following fails. So how the hell do you get lucky enough to get that 1 good trade that pays for the rest if the very markets that constantly TRAIN you out eventually make you react by leveraging on very small moves that may or may not have anything to do with short or long term trends (ie fading rallies is not trend following, nor is any other mean reversion concept).
Its pretty difficult to switch from buy/hold (or sell/hold) in trend following mentality to a mean reversion trade and stick with each one with discipline. in fact, its realistically impossible.
The better question is: how the hell can trend following be effectively done while also managing risk? Can it be done?
Take google or aapl in an obvious uptrend (or are they? is the trend done near term?) How do you buy these and what stop losses or risk management do you use?
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