What does a trend follower do in a bear market?

Discussion in 'Trading' started by Steve Ladd, Mar 24, 2018.

  1. Say I'm a long-only trend follower who stops out whenever something loses 7% from the previous high. That preserves my capital, or does it? If I jump back in on a new trend but it turns out to be a bear trap, I lose another 7%. If a bear market has started this could repeat until my capital is gone. I see two options: 1) after, say, 3 bear traps put everything in dollars or gold and wait it out, or 2) get into shorting, which I've never done because you don't get dividends and you're running against the overall trend of the markets, which is to appreciate. Opinions?
     
  2. Smaller stops?
     
  3. Many things wrong here. First, if you are long trend only, what is your defn of a trend? If defn is not met, then stay out. Second, using a percent loss has not basis in the real world. Why not use something based on price action. Third, if you are stopped out, what tells you a bull trend has resumed?
     
    soulfire likes this.
  4. lovethetrade

    lovethetrade Guest

    You need to unlearn everything you've learned.
     
    tommcginnis likes this.
  5. qxr1011

    qxr1011

    agree
     
  6. Long only = negative skew = big drawdowns.
     
    zdreg, dealmaker and tommcginnis like this.
  7. Younes

    Younes

    Follow the trend
     
    Muffhands, tommcginnis and hmcp like this.
  8. LS1Z28

    LS1Z28

    Swimming against the current is never wise. If you insist on being a long only trend follower, I suggest you look at "going long" on some inverse ETF's in a bear market. ;)
     
  9. algofy

    algofy

    Bear market? What is that?
     
    Windlesham1 likes this.
  10. southall

    southall

    Its when the stock market drops at least 20% from all time highs, happens about once every 10 years on average in the US indices.
    The last one started 10 years ago, so expect another one soon.
     
    Last edited: Mar 24, 2018
    #10     Mar 24, 2018