Some are saying relief rally….dead cat bounce…Panic seems to have resided ( at least for now). Markets do not go straight up nor straight down. A great deal of damage was done to the world economically and financially. Markets have V bottomed and ran right back up. Everyone seems to have an opinion….My only opinion is that anything can happen and I am prepared. I trade with trailing stops. I have orders sitting to be placed….no fear …no greed…just typical trend following grind!
As I am in touch with many aspiring traders during the day, I get inspiration to write. So many are more confident and risk more money on trades they like or maybe better said think they like. Some of these aspiring traders have gotten their fingers burned by selling the British pound at the lows only to see it rally…( somewhat)….Some bought gold above 1350. They traded their opinions. They traded maybe their greed. I prefer to trade my rules. I know over time…( many times….times much longer than I could have imagined I get out of draw down & become profitable once again. Trend Following is very tough stuff. That is why more than 90% of people who trade lose money and quit. I should only have a dollar or a pound for a time a trader tells me either teach me over the weekend or just give me the system. I answer these very smart people who are doctors, engineers, pilots and lawyers with a very simple question. How long did it take you to learn how to fly a plane or learn how to do open heart surgery? I am sure it was not a weekend course or just give me the answers.
Trend following is hard work and takes years to learn. The concepts themselves are very simple…we make it very hard. Greed…fear and a myriad of emotions come into play…Forget the feel good trades…It is one of the surest ways to lose money….
After 22 years trading, I have lost the feeling of good …but know the ever present feeling of knowing I do not know the future. That in order to succeed over long periods of time, I must take every trade that is completely thought out and know that a vast majority will not work, yet I will put on the next one….
Good Luck trading…
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (“FOREX”) IS SUBSTANTIAL.
Rather another ugly session for perma bulls yesterday. I read that several trillion dollars were wiped out over the last several days. If we step back, we might think this could be the beginning of something ominous.
Maybe the only good news out there was that the volume in the stock market was lower than Friday. There is a great deal of selling by large institutional players & mutual funds. Crashing through the 50 day moving average on heavy volume is a huge negative for the stock market. The major averages broke below all their important moving averages today and all are below their respective 200 day moving average.
This is even worse!!!
The major averages tried to take out the prior highs however this has failed. It could be argued that we are in the beginning of a Bear market.
If the market can’t rally soon and with some conviction we will likely go back and test the February lows at best
Wait a minute wasn’t Soros claiming the British Pound would crash?
Was this just dis information in order that gullible and non trend following traders would loose money….
Do as I say…but not as I do?
My simple point is everyone has opinions….Some so called gurus state things for their benefits.
Trend Followers follow the trend. No it is not easy…there will be countless trades that do not work…However there will be some that supersede any of your wildest assumptions….It is a long a haul…Trend following is a marathon!
Trend following does not include predicting. It involves reacting. I always look at the indexes and see where they are at. Currently they are looking rather sickly.
A tidal wave of selling started in Europe and moved to the Unites states when the US markets opened. The major averages gapped down at the open and were unable to stage even a weak rally during the day. The losses were significant as the COMPQ fell 4.12% and the SPX was lower by 3.59%. Both closed at the bottom of their intraday trading ranges, a sign of a lack of buying as prices fell. No one would step in to support prices. Volume was much higher across the board. This is not unusual after a big new event, and the Russell re balancing added to the total. In any event this constituted a distribution day on all the major averages.
No one knows how this will play out and if the Brexit will be a catalyst for a long and waited bear market…As a trend follower you want to follow the trend. Unfortunately there has just been a lot of chop over the last several years. The only way to avoid choppy markets is not trade…Keep in mind, the most amount of money to be made is at the beginning of a bull market. Not the END!!
Trend Following is based on Break out trades and Trend Retracement trades. In this Metastock webinar I discuss contrarian trend following concepts. I first started trend following 18 years ago. I wanted to know who was succeeding and what they were doing. My broker told me the most successful client of his company was a dentist. He was not a Harvard graduate nor a partner in Morgan Stanley. Yes, he was a dentist! He invested in a robust trend following concept $200,000 dollars in 1979. He let that money compound over time. Today he has pulled out over $12,000,000 over the years and has a $5,000,000 trading account as well as accounts for his children.
The dentist was the exception. Most clients of the brokerage did not make money. Most clients actually lost money. The difference between the majority of the clients that lost money and the Dentist was he had a trading plan with risk management & he followed it with patience & discipline. Even with his plan he always had numerous loses, went through drawdowns and even long periods of time in which he did not make money. However he did not ever give up or start to look for a new methodology.
He did not have any magical Holy Grail formula. He is a trend follower who had a simple robust methodology and more importantly knew how to properly condition his thought processes to get through all the tough drawdowns and long periods that he did not make money.
Brexit…earning reports ….Draghi…or whatever in the news can enhance and derail trades. There are times there are sharp reversals…strong gaps up or strong gaps down. What is a trend follower to do?
Regarding earnings reports for stocks…I rather wait. If I am already in the trade, I guessestimate what could be the worst situation based on prior earning reports…however I will not put on trades right before. Same said now right before Brexit. I would prepare to be somewhat on the sidelines.
With stocks I trade discretionary with a complete plan….my commodity trading is completely mechanical. No emotion…no fear…no greed. I believe in the model as I have used it for years and fully know I will have many trades that will not work…
Bottom line…Trend following with the news just makes a hard thing even harder.
Trend following takes a great deal of emotional fortitude. No learn a system or method and bank money. Constant marathon…
Nothing like a news or emotional rally. We were below key moving averages and pow….
The market gapped higher at the open today following a strong rally in Europe. A poll came out yesterday showing the remain vote in England is winning and fears that they would leave the EU lessened. This may take some of the uncertainty away from Thursday’s vote, unless the vote is to leave
Trend followers read the writing on the wall today. The stock indexes closed at or near their intraday trading lows, a sign that some market participants were selling into the rally. This is not what you want to see for the hope for an old tired bull market to wake up again.
Brexit and today’s market action prove even more so the need for trading rules. However with these trading rules, they will not mitigate whipsaws and trades that don’t work. I can tell you from personal experience. Fasten seat belts…the fun is beginning this week…
I did not know that Obama is a technical analyst in the stock market….More so…hearing things like this do not make me feel overly comfortable after 7 years of one of the longest bull markets in record…