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Catching Trends When Trend Following

Catching Trends When Trend Following

Seems many traders that I speak to look for some of the most complicated methods to finding trends. The fact of Catching Trends When Trend Following is throwing alot of mud at the wall. Very little sticks.
There is NO way of avoid of having losing trades. Losing trades are as natural as breathing. Once traders and new trend followers realize this and accept it…( internalize it) they are on the path of compounding money over time.

When something moves…ie trends…it can be as simple as a moving average that gives the signal. The real key is to have a methodology…or set of rules which mitigates the extent of size of losing trades. Ie…Keep trades that do not work to a minimum.

What I see at the end of the month when managers update their returns….we are in the same trades…ie. I have been long TCOM Rubber which virtually doubled rapidly….Short Cocoa and Long Lean Hogs. One of the current issues is the lack of markets trending. Alot of sharp reversals or trends start and immediately stop. Honestly, rather frustrating…but nothing ever really has to happen.
We just need to stay in the game, try to keep loses small and throwing mud….

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (“FOREX”) IS SUBSTANTIAL.

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Following the Plan When Trend Following- It is Never Easy

Trend following is a mental game. It is you against your emotions…greed and fear. Trading and trend following are never easy. It does not matter what you trade…stocks..bonds…commodities. They are all tough to scratch out a profit.The only way if you want to succeed in trend following is follow your plan. The fact is most traders fail at trend following. The number is probably higher than 80%.
More so, most traders do not even have a plan….I think this…I think that…and lose money.

Will demonstrate on a real trade that I have been in for a long time. I have been whipped around prior and have had many loses. However currently Cocoa is trending. I have no idea if it will continue or stop. In the below chart you will see various times if you were short there were “painful” retracements. For instance yesterday cocoa was up a hurtful 4.15%.

cocoa

There were other instances. The only way to stay in a trade is to follow your plan. Do not have the fear of having your profits evaporate. Do not think you can add more. You need to develop a plan that matches your personality and most importantly the mental stamina to stick with it…

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.”

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Trend Following 2017 Interest Rates & Trump

Trend Following 2017 Interest Rates & Trump

As I always say…Trend following is tough. 2015 and 2016 were not positive for most trend followers. Actually 2011,2012 and 2013 have been beyond tough. Many have left the business. So what keeps me and others trading a large basket of commodities. If I want to be introspective, it is the strong belief anything can happen. Just look at Trump being elected. I doubt anyone really expected his election, let alone Obama or Hillary. As much as I would like a 50% years return…I do not expect it…..but it can happen. I have had a long stretch of draw downs, so I have to be positive and it is easy to quit. It is very hard to have the emotional stamina to put trade after trade and then have a string of losses, albeit small loses…but still tough…Interesting enough, our family has invested with one turtle trader. We purchased his draw down in 2012, which was 20% plus. He is still down from that point and so are we…All his past performance has not made an impact positively yet for us…

The same with Trend following, anything can happen. Who would have thought or even cared if Tcom Rubber virtually has doubled. Maybe when you go and buy new tires for your car you might feel the inflation. Anything can and will happen with trend following. It is grueling and when you least expect it you stumble into some nice trending markets. I can tell you how many times I was whipped both long and short with Cocoa. Now this market is trending. The same can be said with Lean Hogs. Been whipped around these many a time. I have no idea what trade will work and which not. However at some point, I personally believe I will sit back and say….WOW can you believe this…Just look at Silver in 2010 as an example…or Wheat or even Crude oil.

This is trend following. You will have more trades not work, than do work. You need to try to keep the loses small and have the patience to let trades work over time. It is hard not wanting to ring the cash register and take profits. How does one feel for instance, so many trades have not worked…have had a long list of small losing trades and then kaching…a trade is working and you might be X dollars and you are shocked. You must follow your system. You must have the discipline. Without discipline you are lost and you will lose money.

Point…
You never know what trades will work and which not. More so, as much as trend following has been a struggle and I have gotten used to the fact that the majority of the trades have not worked…You might say I have become to love my loses. As I have been trading since 1994, I know ( believe) that I will/should stumble into a some very good periods as well.

Now all are ( at least my colleagues) expecting inflation and higher interest rates. Honestly, I again believe anything can happen. Trend followers do not expect, they react. Inflation is a wealth destroyer and personally I feel that I have positioned my family to protect our net worth through trend following. …However who knows…I might end up again with a rough and tough …choppy non profitable period.

The wording…Past performance is not indicative of future performance is very true. It goes to the essence of trend following. We do not know the future. We can only react. There are no guarantees of profit. That is why so fee can actually make money trend following. Both managers and clients alike are human beings. All want easy profits. In trend following one truly needs patience….discipline and even that does not mean profits will come…

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.”

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Portfolio Selection When Trend Following

Portfolio selection is one of the factors in trend following profitability. This does not matter if it is stock selection or a large basket of commodities.
Regarding Stocks, I am of the school of Canslim. Canslim is a combination of both technical and fundamental. As in trend following, we look for break outs and retracements. The key is the selection of the portfolio of the watch list…

We want very profitable companies with growing earnings both quarterly and annually.

baba

nvdaq

More so with Commodities, one needs to look at a very large portfolio and use a relative strength basis to determine which commodities are the strongest and which are the weakest. From that point look to buy the strongest and sell the weakest.

Many commodity traders did not even think about Rubber. This has been a big mover ( who knows how long it will last). Contrarily Cocoa is hitting multi year lows. The key to trend following is have the patience to keep with trades as they working. Clearly trailing stops are being used. It can be anything from moving averages to trailing ATR stops. Nothing has to be rocket science. The rocket science is the discipline of having multiple trades not work…yes…loose money…and having the fortitude to put on the next trade. You never know what trades will work and which trades will not work when Trend following.

cocoa

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.”

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Don’t Race To Your Next Accident with Trading

Trump is the new President….many ideas are changing. Bonds are losing value….stocks are roaring and there is alot of interest in commodities due to inflation…One word of caution…

Don’t Race To Your Next Accident with your investments…

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How To Use The Moving Average Crossover Trading Strategy To Make Profitable Investment Decisions

How To Use The Moving Average Crossover Trading Strategy To Make Profitable Investment Decisions

No matter what investment vehicle you’re using or what asset you’re investing in, chances are that you understand the importance of strategy. At the end of the day, the strategy or strategies that you use will largely dictate your profits or losses in the market. Today, we’ll talk about one of my favorite strategies, the crossover trading strategy. I’ll let you in on what it is, how it works, and why it’s a great way to make profitable investing decisions.

What Is The Moving Average Crossover Trading Strategy?

The crossover trading strategy is a technical trading strategy designed to tell investors when it’s best to enter into and exit out of a position. The strategy uses two different moving averages. A moving average is essentially the average price of a financial asset over a predetermined number of days. For example, a 50 day moving average will give you the average price of a financial asset over the past 50 days. Tomorrow, the number from 50 days ago will drop of and today’s closing price will be added into the average, causing the average to consistently move.

With the moving average crossover trading strategy, you will be tracking two different moving averages, the 50 day moving average and the 200 day moving average. Every time these two moving averages cross, you get a signal that it is time to make a trade.

The Two Different Types Of Moving Average Crossovers

Ultimately, there are two different types of moving average crossovers that you’ll want to watch for, and both signal different things…

The Bullish Crossover – The bullish crossover happens when the shorter 50 day moving average crosses over the longer 200 day moving average in the upward direction. This means that over the past 50 days, momentum upward has been stronger than over the past 200 days. So, moving forward, it’s more likely that the the value of the asset will head upward than downward. When you see this, it’s a great signal that it’s time to buy the stock.

The Bearish Crossover – The bearish crossover happens when the shorter 50 day moving average crosses over the longer 200 day moving average in the downward direction. This means that over the past 50 days, momentum downward has been strong than what we’ve seen over the past 200 days. Ultimately, this signals that the value of the financial asset will fall ahead. So, the bearish crossover is a great signal for when it’s time to sell.

Why These Are Great Signals For Profitable Investment Moves

At the end of the day, while there will be curve balls thrown in the market, movement tends to repeat itself. Therefore, by following technical trends and making moves based on what generally happens when we see signals like crossovers, we can be more effective when making our own predictions in the market. The bottom line here is that when we trade or invest, our ultimate goal is to turn a profit when we make our moves. Using a solid, proven strategy when doing so will likely help you reach that goal more efficiently. There are few strategies that have the proven track record that the moving average crossover strategy has.

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The Fed & Gold

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rosland_gold_traits_table

In the third quarter, central bank gold purchases fell 51% year-over-year, but over half of the world’s central banks plan to increase their gold reserves in the next three years.

For the same time period, investors put more money into gold-backed ETFs, with capital inflows rising 40% even as changing consumer habits kept gold demand in check in other parts of the economy gold affects like jewelry. According to the pie chart on the first infographic which was based on this source for gold-backed IRAs, 45% of the world’s gold still goes to jewelry. For India and China in Q3 however–two well-known buyers of gold for this purpose–gold purchases fell 28 and 22 percent, respectively.

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Stock Market Crash Alert (When ??)- Trend Following

There will be a nice crash at some point, that is what stock markets do. Maybe this will be next week…maybe next month…maybe next year. Stock Market crashes completely normal. However it will not likely be a problem for you if you are closely monitoring leading stocks, closely monitoring indexes, not using leverage, and have a good set of sell rules that you follow without hesitation. Learn these lessons and add them to your daily routine, and then a market correction becomes an opportunity you look forward to.

More money is made coming out of bear markets then bull markets!!!

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Multiple Entries On $BABA – Trend Following

Many times leading stocks give us multiple entries when trend following. Regarding BABA we had two such trend following entries.

The first entry was a double bottom break

The second entry was a traditional Cup and Handle with sloping trend line.
Studying charts on trend following sharpens your skills and helps you become better traders and trend followers.

baba

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The Difference Between Trend Following & Traditional Investing

Systematic diversified and risk-managed trend following doesn’t produce crashes, just Draw downs that Grind.

We are in one of those grinding moments now….

Typical Trend Following!!!

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