>>>even the heroes can't seem to do it...... trend follow<<< Trend trading for the most part is highly accurate. The problem humans have including me is when we mis-read the trend. Still, even such mistakes can be corrected if you don't let your "ego" stand in the way in accepting your mistake and taking advantage of that knowledge. Such an event happened to me and my friend. We had puts on XTO MI and got in at $2.00 but, the stock "unexpectedly" reversed on the third day. I told my friend to sell the put and we will go long. Sold the put at $1.80 and went long with call XTO AI and got in at $2.50. Went as high as $3.80 the next day (I was at the trader's expo in Las Vegas). Sold it the next day at $3.20 for a profit of $350.00 for two days against the $100.00 loss on the put. So, instead of losing more money, we turned it into a winner----just because we let the trend tell us what position to take!!! Trend following no good??? If you say so----just more for us!!! LOL
OK, i see i have been making far to many posts so i am gonna slow down, BUT i wanted to say this first. Technical Analysis is in fact what makes the game work". There could not be a SINGLE SYSTEM out there without it, no ands, buts, etc about it. If some have a hard time getting a handle on that statement, i suggest you take up poker because without technical analysis you are just blowing smoke up the rear pipe. Check this out: This is the best i have ever read it explained in plain english. When you bring up the site go to Part 1 where it says: WHAT IS TECHNICAL ANALYSIS? NUFF SAID.... www.technical-analysis.com OK, then once you get the HOME page, on the topics bar on the LEFT, go to ; LETS LEARN TA, then you will get to it. Developing trading systems - Part 1.....try that.... it can not get any plainer than that....... :eek: the explanation of what TA is, that is.....
Bighog, Right on!!! Anyone who doesn't use technical analysis is committing suicide. You might as well hand your money to the traders who use technical analysis as they have a huge advantage over you. That said, each trader is different and there are different ways to trade which can all make money. I try to trade with the trend and have done okay. Still working on my mistakes and reviewing my trading journal at this very time. Wish everyone the best and hope 2006 is good to one and all!!!
a year later, JWH and his trend group are still struggling to find the trend. http://www.jwh.com/fund_details.asp#gotop if these guys, with the most money of all time in their trend programs can't find the trend--- how can the average trader? i stand by my contention that trend following is simply a newage marketing term for buy/sell and hold. this seems to be verified by the drawdowns currently experienced by the leading trendys. best wishes, surfer
Trend or no-trend, it depends of the time frame you're looking at. Currently the equities market "trends sideways" for position trading, but you can find good up and down trends at other levels.
Trend following works. One only needs to apply it 'correctly'. What I mean by 'correct': 1) Determine context. Trends exist in all time frames. Longer term trends (monthly, weekly) supercede shorter term trends (daily, hourly, min) in importance. Or, another way of saying it - shorter term trends only exist INSIDE longer term trends as pullbacks, rallies etc. The monthly/weekly trend is the MASTER trend. All shorter time frame trends occur within this MASTER context. 2) Draw correct trendlines. Trends are drawn using the point 1-2-3 technique. Point 1 is the highest/lowest point in old trend. Point 2 forms the first V - opposite of point#1. Point 3 forms the second V on the same side as point#1. Check out one of Jack Hersheys thread for an explaination. Or here: http://www.elitetrader.com/vb/showt...\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\&pagenumber=1 A line drawn through Point 1 to 3 represents your trendline. A parallel trend line from 1 to 3 is drawn through point 2. This is your channel line. In the above example, the trend is down. Price will often move up to the trendline (right-most line) and bounce back down. The right trendline is where very low risk entries are placed in the direction of the trend. This is how trendlines are drawn. Most et'ers cringe at the 1-2-3 technique because its championed by the much lamented Jack Hershey/Grob. However, those need to keep in mind the 1-2-3 technique isn't the invention of Jack Hershey. Rather its the traditional trend charting tool of technical analysts everywhere. Take a look at John Murphys' seminal work "Technical analysis of the Financial Markets' and you'll find the 1-2-3 technique explained in chapter two. Nothing new under the sun. 3) Putting it all together. The market HONORS and OBEYS longer term trendlines far more than short term trendlines. Use this to your advantage. Identify the long term trend using the 1-2-3 method. Identify areas of support and resistance. When price approaches the long term trendline (right line/hard resistance), switch down to a lower time frame. Wait for a 1-2-3 trend in the direction of a confirmation bounce. Take the next trade off that trendline = low risk/high reward entry. This is what is often referred to by chartists/technical analysts when they, 'look for trades off the higher time frame and enter on the lower time frame'. Explained above represents one of the easiest and least confusing ways to apply trend following. More complexity (read: trading opportunities) can be accessed if one chooses to trade the subtrends occurring WITHIN the master long term trend. This is done by: 1) drawing 1-2-3 trendlines on each relevant time frame. What is relevant? The market places precedence on higher time frame trendlines over shorter term trendlines. So higher time 'fractals' should be drawn first, followed by the next logical smaller time fractal etc. Lastly, trendlines in the desired trading fractal should be drawn. The purpose is to generate a chart that projects higher fractal trendlines on the lower time frame chart you intend to trade off. What we ultimately arrive at is a chart which is superimposed by all higher fractal trendlines that essentially serve to *bound* or provide *context* for the tradeable area. Again, this is nothing new. John Murphy and countless other TA books suggest an identical method - using multi-fractal trendlines to identify short term trading opportunities. Of course, theres more. Volume is usually used as a confirmation indicator (volume should move in the direction of trend - ie increases on rallies and declining during pullbacks during uptrend. Others. Failure to traverse and trendlines breaks signal exits. Its all pretty simple. Just have to take a leap a faith and invest the time to make it work. Because it does.
These anecdotes you post prove nothing. So Trader B lost money in his trendfollowing system. So what? What does that have to do with all the other trendfollowers, many of them very successful? If you were expecting universal success, then that's just being naive. This is a competitive business. A new technique's shelf-life is directly tied to how widely known and used it is. You'd go broke trying to Turtle trade today, because the conditions under which Turtle trading was successful are long past. Trendfollowing has to adapt with the trading environment, albeit keeping the underlying philosophy ("trade with the trend").
ok, i agree that anecdotes prove nothing. however, "trade with the trend" means nothing also--except in hindsight--after the entry. are you able to show me one test or statistic that proves that trends ( as they are commonly understood--- (higher highs, higher lows, lower highs, lower lows) provide any sort of edge to the trader? thanks! surfer