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Are you a trend trader or a counter-trend trader? 29 replies

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Trend Trading

Quoting AlbinaGrande
Looking Great G. The only thing that I am not clear about is how do you decide if you will Close out a Stack at the end of the week vs letting it roll forward for potentially a really long run. AG
Hi AG. Well, we have to take profits or we will never have any. I close a stack during the week if it hits my TP or SL condition. I close a whole portfolio of trades if they hit my 5% loss limit (and stop trading for the week), and I close a whole portfolio of trades if it hits my profit limit, about 4% in a day or 10% in a week, after it pulls back just a little.

Individual trades or the whole portfolio of trades will always stop out at a preset limit if they turn against me. It is conceivable that a single trade, or a whole portfolio of trades could run a very long time and go to a very high profit, but that is by design. It is probably the unlimited upside that is confusing. There are situations where there is no obvious upside exit. For instance, in a couple situations I could possibly make profits for many weeks in a row and not exit. We have a limited downside and an unlimited upside. Usually trades don't run more than a few days to a couple weeks with my settings, but it's always possible, in theory at least, for one to run to riches. Did that make sense? - G
Quoting Graviton
{quote} Hi AG. Well, we have to take profits or we will never have any. I close a stack during the week if it hits my TP or SL condition. I close a whole portfolio of trades if they hit my 5% loss limit (and stop trading for the week), and I close a whole portfolio of trades if it hits my profit limit, about 4% in a day or 10% in a week, after it pulls back just a little. Individual trades or the whole portfolio of trades will always stop out at a preset limit if they turn against me. It is conceivable that a single trade, or a whole portfolio of...
Thanks G. Will ponder for a while perhaps with a glass of wine. Hahahah AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
Graviton - I want to respectfully disagree, but it's hard to argue about regularly dropping all those pips you've collected in the bank.

I guess I feel there should be some option to leave perhaps one trade from the stack to grow to its full potential... if not the whole stack. But then again, is that worth the risk?

Doing it that way is a lot like how farmed veg is grown to a size and then harvested on a regular basis. People with allotments or growing privately or for shows will often achieve something far greater.

But the end result is to build the account (at least for most people), so ensuring those profits are taken on a regular basis may be certainly be the most consistent way to do it. Even if it doesn't provide the biggest increases at any particular point in time.
Quoting Nefser
Graviton - I want to respectfully disagree, but it's hard to argue about regularly dropping all those pips you've collected in the bank. I guess I feel there should be some option to leave perhaps one trade from the stack to grow to its full potential... if not the whole stack. But then again, is that worth the risk? Doing it that way is a lot like how farmed veg is grown to a size and then harvested on a regular basis. People with allotments or growing privately or for shows will often achieve something far greater. But the end result...
Hi Nefser. On a three trade stack for example, the obvious thing to do is when the top two trades on the stack retrace back to break even for both combined is to close them out and keep the base trade, hoping it will grow larger later. But hope is not a strategy. With FIFO that's impossible for me anyway since the oldest trade in the stack must be closed out first. So, that isn't an option for me trading from the US.

But does it make sense for you since you aren't bound by FIFO? We know the short term momentum is already running against you causing the top two trades to retrace back to BE. Your 3 stack trade has essentially failed at this point. The question is, what is the probability the price will reverse back again and go back to higher highs, vs. continue it's downward path until most or all of your profits have vanished? And if price reverses again and goes to higher highs, what is your trading plan? Are you going to stack another trade on and put risk back into your trade?

If 50% of the plants in your garden would soon shrivel up and die, and you couldn't know which would and which wouldn't, would you be more likely to pick all the vegetables now rather than wait to see which would grow larger and which would die? To be honest, I don't know how to answer these questions. I've just found that exiting the whole stack at a predetermined point yields a large consistent profit. Essentially, every time I hit 3 or more on a stack I'm 100% guaranteed to make a large profit, without fail. There will always be other trades. There will always be better trades, if you have the capital to take them. But until someone can answer these difficult questions for me, I'll take the bird in the hand vs. mere hope for two in the bush. I'm wondering if the tendency to hold onto the old trade isn't more of an emotional attachment than a financial one. Perhaps it's just hard to give up on something that has given you so much pleasure in the past? - G
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  • Edited Oct 14, 2018 12:19am Oct 13, 2018 11:40pm | Edited Oct 14, 2018 12:19am
Quoting AlbinaGrande
{quote} Thanks G. Will ponder for a while perhaps with a glass of wine. Hahahah AG
It's a Johnny Walker night for me. My new wife lets me have all I want. She's a keeper.

This is essentially a trend following method. Well, it's actually pyramiding on trend following. I don't try to guess at the future. I simply try to get in an existing trend and ride it as far as it will go and use stops to get me out with large profits when it fails me. Today, I'm trying to work on how to increase the distance between the price and the stops as I trade so that I have an ever increasing chance of staying in the trend for longer. Some trends run for months and I'd like to catch one with several stacks on and ride it till my retirement is secured.

I'm thinking of dynamically adjusting stops with ATR to improve the chance of remaining in a trend while still protecting from losing too much profit due to a deep retracement or a reversal. Or maybe I'll just have another sip of Johnny W. - G
Quoting Graviton
{quote} It's a Johnny Walker night for me. My new wife lets me have all I want. She's a keeper. This is essentially a trend following method. Well, it's actually pyramiding on trend following. I don't try to guess at the future. I simply try to get in an existing trend and ride it as far as it will go and use stops to get me out with large profits when it fails me. Today, I'm trying to work on how to increase the distance between the price and the stops as I trade so that I have an ever increasing chance of staying in the trend for longer. Some...
What's your average stop loss distance? Do you set TP as well or prefer to rely manual decision.
Quoting Graviton
{quote} It's a Johnny Walker night for me. My new wife lets me have all I want. She's a keeper. This is essentially a trend following method. Well, it's actually pyramiding on trend following. I don't try to guess at the future. I simply try to get in an existing trend and ride it as far as it will go and use stops to get me out with large profits when it fails me. Today, I'm trying to work on how to increase the distance between the price and the stops as I trade so that I have an ever increasing chance of staying in the trend for longer. Some...
Your profiting from a trend is very very dependent on your entry point these days. If you don't know where to get in, trend following advice is as useless as the advice of buying low and selling high.
When you see it, BET big.
Plus I don't think you can be consistent by being in every trend.
When you see it, BET big.
Quoting Graviton
{quote} It's a Johnny Walker night for me. My new wife lets me have all I want. She's a keeper. This is essentially a trend following method. Well, it's actually pyramiding on trend following. I don't try to guess at the future. I simply try to get in an existing trend and ride it as far as it will go and use stops to get me out with large profits when it fails me. Today, I'm trying to work on how to increase the distance between the price and the stops as I trade so that I have an ever increasing chance of staying in the trend for longer. Some...
Hi G.

I wonder if there is any way to systematically set about working with ADR/ATR to optimize SL placement with respect to staying with the Trend. I suspect not because while it may be heresy, I believe that the Market character is shifting to being more erratic and erratically erratic at that. Could be a passing phase or could be other hands at work. Maybe trial and error is the quickest, simplest approach.

I may be all wet, but I liken what I see to local traffic patterns. 10 years ago I could get on the road and cruise for the towns near by with barely a bother. In fact only 1 traffic light between me and the Capital 200 miles away. Today forget about it. It reminds me of an article in Scientific American many years ago about traffic nodes. At a certain density nodes appear almost magically and self perpetuate. Today highway engineers arrange for entry onto some highways based on those principles using timing strategies. While it is said that Markets may be Fractal in some respects - I think really only with regard to TFs - their flow patterns strike as being more Nodal than Fractal.

It also strikes me that the best place to shop for a durable Trend is out on a Weekly wick. With choppy Markets your focus on the week by week approach seems eminently sensible. A quick look several years ago suggested that each Pair might have a multi week Trend 1 or 2 times a year and frequently the Pairs bunched up, not just with correlated Pairs as you might think. So lots of down time to get into trouble with Ranging stuff.

Like your choice in beverage - I have got a big bottle of Johnny Walker Blue on the shelf. Stop by anytime. It was a gift from a young colleague several years ago, and I rarely sample it. Mostly Ron Abuelo for me - price is right and as good as many single malts.

Best, AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
Quoting Rennaissance
{quote} Your profiting from a trend is very very dependent on your entry point these days. If you don't know where to get in, trend following advice is as useless as the advice of buying low and selling high.
I completely disagree. Go back to my previous post and Graviton's comments about the same. You never know when a trend will form, nor how long it will last.

As long as you have a trade signal to get into a trade, then:
A) if it's trending and it's in the same direction, just go with the flow.

B) if it's already trending and it's in the opposite direction, go with the flow (again), but perhaps be wary of this being a retrace (regardless how strong).

C) if it's not trending, how do you know this isn't the start of a nice, strong trend?


This is exactly what I stated in my prior "questions" I threw out about people being wary of having 'missed the trend'. It's a fallacy (until the trend finishes) and needs to be put to bed.
Quoting AlbinaGrande
{quote} I wonder if there is any way to systematically set about working with ADR/ATR to optimize SL placement with respect to staying with the Trend.
I wonder if this is adding complexity for no major benefit. Essentially the SL is to limit the pain (and cost) of a trade going against your position. If it goes far enough, it's bound to end up as a signal in the other direction. So, if you're deciding between -50 pips or -62 pips, it'll be fairly arbitrary, as you may use a -50 pip SL for your trade, and then I get a trade in +12 pips later than you, but set mine for -62. Different trades, same SL. Same result if it gets down and clears them.

It's a rough estimate (guesstimate?) of an insurance premium. I think if you're willing to take more risk, but slightly more interested in staying in the trade, you'd increase it. If you want less cost per 'failed' trade, then you decrease it. Volatility changes from day to day and even hour to hour some days...so I think it's tricky. Perhaps a weekly assessment of the prior week or two would give you some estimate of how it might continue? No idea really, so I'll let you and G hash it over.


Quoting AlbinaGrande
{quote} I suspect not because while it may be heresy, I believe that the Market character is shifting to being more erratic and erratically erratic at that. Could be a passing phase or could be other hands at work.
My father has worked in the financial industry for years and in our chats over time (especially once I'd mentioned about starting Forex trading), one of the key points he mentioned was how "consistently inconsistent" the markets are. (Sadly, I forget the specific phrase he'd used and he's far more eloquent than I). As much as people will talk about how the markets are now, versus before, generally the markets have always their chaotic nature, with an interesting capability of surprise. Yes, automated trading, etc. have all come in and made their mark to disturb or 'alter' how this big machine runs, but even after all this time, it's still as liquid and capricious as ever, and at times, perhaps even more. Luckily, there are now even more tools available to allow even more fools to get into this entertaining activity. ;-)


Quoting AlbinaGrande
{quote} Like your choice in beverage - I have got a big bottle of Johnny Walker Blue on the shelf. Stop by anytime. It was a gift from a young colleague several years ago, and I rarely sample it. Mostly Ron Abuelo for me - price is right and as good as many single malts. Best, AG
Again, I'll have to respectfully disagree (with both you and Graviton this time), as over the years I've made numerous attempts to get on with various whiskey's, single malt's, etc., but they don't seem to blend with my palate. For me, a lovely bottle of Tawny Port (hopefully 20+ years or older - Taylor's is a favourite, but have a 20 year Andresen that's now been cracked open) is a lovely thing to have. Regardless, I'll tip my glad in a toast to both of you and to many more moons of pip collecting.
Quoting dispersion
{quote} What's your average stop loss distance? Do you set TP as well or prefer to rely manual decision.
My average sl is about 85% of adr. My initial TP is 3 X sl, but I'll increase TP as a good trade progresses with no real limit. There isn't much manual decision. I'm taken out of trades by stops, preset rules defined above or a very large quick spike in my dirrection. - G
Hello Guys. This question does not relate to the thread. I just created my account and picked the first thread i saw to ask this question
So i am from South Africa and there are a lot of profitable traders here. One of the things that intrigued me is that one of the successful traders here said that he changes brokers after a few months due to the fact that he's making +/- $400 000 a month. He was not the only one, another profitable trader posted the same subject on his Instagram page as well. Now i don't have contact with these guys or i would have asked them the question I am about to ask.

Can anyone possibly tell me why a profitable trader would change brokers a few times for the sake of being profitable?
Quoting Rennaissance
{quote} Your profiting from a trend is very very dependent on your entry point these days. If you don't know where to get in, trend following advice is as useless as the advice of buying low and selling high.
Perhaps some people can see a trend before it is well developed, but I can't. I see trends in hindsight. Looking at weekly charts we see many past trends lasting months. If a trend lasts 6 months and my system is designed to ride it for two weeks, it doesn't matter much when I enter it, as long as it isn't in those last two weeks. I have no magic method to get in on the first bar of a new trend. I don't believe any such magic exists. Fortunately my trading doesn't require that sort of precognition. I simply enter when the 50 period MA crosses the 200 on timeframes of interest. It's one of the simplest entry methods I know of. Others may be better, but they would probably just confuse me. Best success. - G
Quoting Nefser
{quote} I completely disagree. Go back to my previous post and Graviton's comments about the same. You never know when a trend will form, nor how long it will last. As long as you have a trade signal to get into a trade, then: A) if it's trending and it's in the same direction, just go with the flow. B) if it's already trending and it's in the opposite direction, go with the flow (again), but perhaps be wary of this being a retrace (regardless how strong). C) if it's not trending, how do you know this isn't the start of a nice, strong trend? This...
The S & P has been in an uptrend like forever. Buying everywhere will result in a profit in the long run. But will also result in average performance, which is not bad. The whole point of trading is buying at the low point in the trend and selling at the high point.That's the only way to outperform the market. Trend following is not a secret, most investors are trend followers by definition. The 1% we are talking about are able to pick tops and bottoms consistently or enter in the trend at a low risk point. A good case in point, buying the SP500 at its peak(in 2007) will have resulted in a more than 100% profit by now, but remember it took more than 7years just to recover from the 56% market decline, not even to talk about the emotion. To outperform other investors one must be able to time the swings, with precision. In other words it's not good enough to be right, one needs to be right at the right time.
When you see it, BET big.
Quoting Rennaissance
Plus I don't think you can be consistent by being in every trend.
I'm not sure what you mean? The market is uncertain. I try to be as consistent as possible. It's hard when I suffer a 20% drawdown but it's the price of success. Show me a trader that has consistent large profits with no major drawdowns and I'll show you someone who is cheating like Bernie Madeoff or an inside trader. - G
Quoting Graviton
{quote} Perhaps some people can see a trend before it is well developed, but I can't. I see trends in hindsight. Looking at weekly charts we see many past trends lasting months. If a trend lasts 6 months and my system is designed to ride it for two weeks, it doesn't matter much when I enter it, as long as it isn't in those last two weeks. I have no magic method to get in on the first bar of a new trend. I don't believe any such magic exists. Fortunately my trading doesn't require that sort of precognition. I simply enter when the 50 period MA crosses the 200 on timeframes of interest. It's one of the simplest entry methods I know of. Others may be better, but they would probably just confuse me. Best success. - G
I see trend following as comparative to buying an index fund . Good advice but to a young man like me, that doesn't have a lot of money, not practical. To become rich I have to do better than average. To an older person, best advice in the world.
When you see it, BET big.
Quoting Graviton
{quote} I'm not sure what you mean? The market is uncertain. I try to be as consistent as possible. It's hard when I suffer a 20% drawdown but it's the price of success. Show me a trader that has consistent large profits with no major drawdowns and I'll show you someone who is cheating like Bernie Madeoff or an inside trader. - G
OR Stanley drunckenmiller, marty Schwartz ,mark weistein etc.
When you see it, BET big.
On March 10th 2009 Mark Haynes (RIP) called the bottom of the stock market crash to the day live on CNBC. It was the most amazing thing I've ever witnessed in investing. I can't even begin to explain it. I wish I had those abilities, but sadly I don't. As noted earlier there are only two methods of investing that have been shown to produce large profits, value investing, i.e. Warren Buffett, and trend following, i.e. Dunn Capital and many others. I suppose there may be a savant out there with some super abilities. May God bless them and keep them safe. I'm not one of those people, so I have no choice but to grind out profits the hard and slow way. - G
My take on this topic is that trends do exist for sure because economy have cycles. We have booms and busts and these market cycles will cause trends to happen and this gives traders a great opportunity to profit from these moves and there is cycles on big picture and small picture, the 10 year cycle would be the biggest and daily news would be the smallest cycle because traders reposition their traders based on what fundamental results we are expecting in the future. This is really complicated for average retail trader to understand all the fundamentals but we are lucky because now we have charting and price action that we didn't had 30 years ago. This gives huge opportunity for retail traders because price is always up to date and price action leave all the footprints where was the imbalance between buyers and sellers, by using this information we can make future predictions, for example if buyers take market higher and later we come to visit the same price point, the probability is higher that there will be more buyers this time again IF the buyers were successful with the last swing meaning they made money.
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