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Much of What You Know About 4X is Wrong!

  • #1
  • First Post: Edited Oct 23, 2007 10:12am Oct 19, 2007 7:16pm | Edited Oct 23, 2007 10:12am
Everywhere a new trader goes the sounds of cute little trading proverbs fill the air. They are the rules that all good little boy and girl traders should follow if they want to be rich and famous when they grow up. Rules like 'The trend is your friend' or 'Let the winners run and cut the losers short'. Well, those sayings don't make any sense and I'll show you why.

We will tackle one adage at a time and expose them all systematically.
First up is the biggest trading lie of all time: "The Trend is your Friend". Perhaps it's your friend, but

The Trend Is NOT MY friend.

My trading system relies heavily on hedged positions and is based on rules that run contrary to most of what I hear and read. It takes a diffent mind set than trend based sytems and that's the main reason for this discussion. If you're interested in range trading with hedges you need a different thought process to be profitable and it may be a good idea to discard conventional wisdom that is reinforced by such phrases like let your winners run and cut losers short.

I'm satisfied with what I've learned about trends so far and want to thank everyone for your contributions. If you wish to discuss trends further please start another thread.

Perhaps you've heard a phrase about trading that you'd like to discuss or perhaps you'd like to discuss one of the phrases I've listed below.

  1. Let your winners run and cut losers short
  2. Don't Marry your positions
  3. Don't trade against the MAJOR Trend
  4. Always use tight stop losses
  5. Expect many losing trades and a few BIG winners
  6. Choose order entries and exits carefully
  7. Place order entries and exits near major areas of support and resistance
  8. Don't pay attension to guys with names like Micro-bla bla bla
  9. Don't trade if you don't see a trend

  • #2
  • Oct 19, 2007 7:41pm Oct 19, 2007 7:41pm
Hmmm, Im intrigued on what you have to say next.
Nothing is hard, some things just take more time and discipline.
  • #3
  • Edited 10:06pm Oct 19, 2007 7:50pm | Edited 10:06pm
Quoting NipthePips
Hmmm, Im intrigued on what you have to say next.
I'm with you...


First there is the other guy saying that many traders fail because they don't go for 10 pip trades...

Now here, we should trade against the trend...
  • #4
  • Oct 19, 2007 8:06pm Oct 19, 2007 8:06pm
Quoting Warper

Now here, we should trade against the trend...

You're getting ahead of me here and I don't want people to think I advocate trading against the trend as a rule, BUT there is a time and place for everything.
'Turn, Turn, Turn. To everything there is a season. Turn'
  • #5
  • Edited 9:32pm Oct 19, 2007 8:43pm | Edited 9:32pm
Quoting Micro-MiniMe
I don't want people to think I advocate trading against the trend as a rule, BUT there is a time and place for everything.
Well i'm sorry if i got you wrong, but you definitely argued against the trend. (The thread name says it all about your point)

I can stop posting here if you see that my view doesn't help with your goal for this thread, but you did said that using the trend as the core of our trading is not the way to go.

I'm sorry to tell you this but i think that you are mixing real trends with counter trends that ppl claim to be trend too.

I mean... lets put it this way...

1m, 5m, 15m, 1h and even 4h Chart trends are not our friends. You are right here...

In fact i don't even consider them to be trends because sometimes they can be based in profit taking that have no care of what happens next. They look to be trends because the overral direction seems to fullfil a 200 candle 1 hour chart but...

Think about it... after you close 1 position, do you think about a target after..., or do you care what happens next? No...

But if you are entering, you do care... so, thats why the longer term trends are mostly based on direction, because you know that the extension moves are purely based on entering positions.

Small TF trades can be created by targets too, but the key concept here is that, they are deeply mixed with careless profit take from the big money, that seem to create impulsive moves in smaller TFs, being in fact a random target move created by closings positions (no target).

Daily, Weekly chart trends, are definitely our BEST friends. In fact best friends don't give us money. I guess they would be our girlfriends if they were persons.

We don't need to use mega SLs to trade the larger TF trends. Just using Longer term trends as a filter, is already a golden eggs chicken.

The problem is that not everyone really understands that corrections take place and is worthless to hope for a fast resume trading with the trend in a correction.

Corrections happen when the big money starts to close their positions to claim the profit, and no matter if there was more room to go, they just close because they are happy.

So, we just wait... until we see a clear support that last for a few days and reverses. We then get 1000 pip runs in some pairs, choppy free if you trade the daily charts like i do.

Well this is just my opinion...
  • #6
  • Oct 19, 2007 8:58pm Oct 19, 2007 8:58pm
It's my view that each individual has a unique perspective on anything...so what could be poison to you may well be a delicacy to someone else. Consequently, my policy is to take from each, anything of value that integrates with my mindset, and discard the rest. As a rule, I find shorter time frames suit my own outlook. However, I am learning, will continue to do so and will no doubt remain one till the end of my life. Therefore, I am waiting with bated breath for details on your trading style.
The road to pipland is arduous and fraught with challenge.
  • #7
  • Oct 19, 2007 9:07pm Oct 19, 2007 9:07pm
Here here !! I love it, keep it com'n. Traders need to hear it.
Robonacci com
  • #8
  • Oct 19, 2007 9:09pm Oct 19, 2007 9:09pm
Quoting Warper
Well i'm sorry if i got you wrong, but you definitely argued against the trend. (The thread name says it all about your point)

I can stop posting here if you see that my view doesn't help with your goal for this thread, but you did said that using the trend as the core of our trading is not the way to go.

I'm sorry to tell you this but i think that you are mixing real trends with counter trends that ppl claim to be trend too.

I mean... lets put it this way...

1m, 5m, 15m, 1h and even 4h Chart trends are not our friends. You are right here...

In fact i don't even consider them to be trends because sometimes they can be based in profit taking that have no care of what happens next. They look to be trends because the overral direction seems to fullfil a 200 candle 1 hour chart but...

Think about it... after you close 1 position, do you think about a target after..., or do you care what happens next? No...

But if you are entering, you do care... so, longer term trends are mostly based on direction. Small TF can be created by direction/targets but they are mixed too with careless profit take from the big money, that seem to create impulsive moves in smaller TFs, being in fact a random target move.

Daily, Weekly chart trends, are definitely our BEST friends. In fact best friends don't give us money. I guess they would be our girlfriends if they were persons.

We don't need to use mega SLs to trade the larger TF trends. Just using Longer term trends as a filter, is already a golden eggs chicken.

The problem is that not everyone really understands that corrections take place and is worthless to hope for a fast resume trading with the trend in a correction.

Corrections happen when the big money starts to close their positions to claim the profit, and no matter if there was more room to go, they just close because they are happy.

So, we just wait... until we see a clear support that last for a few days and reverses. We then get 1000 pip runs in some pairs, choppy free if you trade the daily charts like i do.

Well this is just my opinion...
Nice post Warper.

Your points are well stated and duly noted. My main objective with this thread is to examine some of the better known phrases like the trend is your friend in hopes of clairifying their true intention. With this phrase my main objection is that it suggests that a trend is something to aim for and I'm tired of hearing people imply that if there's no clear trend there's no good trading opportunity.

I think it's valuable for any trader to examine such statements and what they mean to each trader individually. Well, enough said for now.

Thanks for your input.
M-MM
  • #9
  • Edited 10:36pm Oct 19, 2007 9:29pm | Edited 10:36pm
Quoting Warper

1m, 5m, 15m, 1h and even 4h Chart trends are not our friends. You are right here...

...
This is one of the better comments I have read in a while. I couldn't agree more with Warper. I always have found it quite silly to see charts posted in 30 min TFs that say "The trend is down" or "The trend is currently very bullish" etc etc. Shouldn't this be stated as, the price for the last 2 days has been to the short side? Something along those lines?

Quoting Micro-MiniMe

Does your friend keep you guessing about his/her intensions?

...
This is a very fine metaphor. In fact, I think your whole post is very thorough and very well said. Especially for one that may be struggling with trend following. Looking forward to the rest.

Nice post.

Quoting benssol
very simple

if anyone here read DOW theory will know that
he classify trends into 3 types: Major, Intermediate, Short

> whenever prices begin trending, they continue for sometime --- Major trend

>whenever Intermediate trend begins to go counter-trend to the major trend, there is an entry coming at the point that intermediate trend reverses and begin again to go in the direction of the major trend --- Intermediate trend

>the entry signal will then come from what is considered to be the Short term trend

I dont know how people begin live trading with real money and dont know this very simple point
But you are still trading the major trend. I think that is the key. Many people do, most are not successful, trade those intermediate trends and short trends as their own being.
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #10
  • Oct 19, 2007 10:22pm Oct 19, 2007 10:22pm
very simple

if anyone here read DOW theory will know that
he classify trends into 3 types: Major, Intermediate, Short

> whenever prices begin trending, they continue for sometime --- Major trend

>whenever Intermediate trend begins to go counter-trend to the major trend, there is an entry coming at the point that intermediate trend reverses and begin again to go in the direction of the major trend --- Intermediate trend

>the entry signal will then come from what is considered to be the Short term trend

I dont know how people begin live trading with real money and dont know this very simple point
  • #11
  • Edited 11:21pm Oct 19, 2007 10:38pm | Edited 11:21pm
Quoting Micro-MiniMe
Thanks for your input.
No problem. I just got a bit confused at first because suddenly i opened the forum and i saw 2 threads in a row indirectly claiming insucess for the ones that follow the core of technical analisys with perfection.

I now know what you mean, like trading in ranges is possible and reliable too, or even more reliable in your view.

...but you have to admit that these two threads have pretty strong titles maybe based on individual performances of the thread starters on those particular conditions.

Quoting Micro-MiniMe
Does your friend keep you guessing about his/her intensions?
If you have open positions... you don't need to guess until you see a clear warning on higher tfs. If you are considering to enter and if you got good profit from the beggining, i don't know where is the problem to take a little loss that ultimatly will lead you do realize that a correction probably has started.

But in fact, rarely are the corrections that happen without warning, and if you are entering already beyond the last major top, what we must do is bringing our SL to BE more fast than usual, even if it leads to a BE that would be a winner without the trail.

A double top or lower top on small tfs is enough to bring the SL to BE right away. This should not be applied at the beggining days of the High TF trending move, but the last opportunity traders might do this to avoid that last loser, maybe avoiding a winner, too bad to be late. But Why the guess?

"Trade what we see" or "Go with the flow", look like cliche but they are sure right!

Besides this, i must remember that one of the biggest advantages to trade with the trend is that, the losers have more chances to be erased since that there are opportunities to enter again where we got stopped out..

In other situations, after a loser we must rethink complely the next trade, but with the trend the work is all done, we probably got a loser because we entered too soon in a retracement, but even passing our SL, once the market decides where is the real barrier, it will move back to our direction, erasing our loss and giving us money.



Quoting benssol
very simple

if anyone here read DOW theory will know that
he classify trends into 3 types: Major, Intermediate, Short

> whenever prices begin trending, they continue for sometime --- Major trend

>whenever Intermediate trend begins to go counter-trend to the major trend, there is an entry coming at the point that intermediate trend reverses and begin again to go in the direction of the major trend --- Intermediate trend

>the entry signal will then come from what is considered to be the Short term trend

I dont know how people begin live trading with real money and dont know this very simple point
Well, i don't trade with Dow's money, so, i don't care what Dow thinks. I think that my view is very well explained in my other post, with fair enough logic and thought and i add this...

A few days ago... EU started to "trend" down in smaller TFs, and in the past that would be enough to trigger a correction, so.. that entry of the intermediate trend is there, but we now see that it never really started. Conclusion, in the end of the day what are we sure that is there? The Weekly/Daily Trend that is lasting for almost 2 years...

Again, i don't want to insist... but i don't know how hard is too understand that Longer vs Short TF is not only about small SL or small TP like we seem to believe at somepoint.

There is a structural difference behind them like i said earlier, and thats the difference between a Trend and "coincidence" direction.

Trend = measure of overall traders | Counter Trend = measure of a few + indecision of the rest + closing

Its not only about time!

But good luck.. anyway.
  • #12
  • Oct 19, 2007 11:37pm Oct 19, 2007 11:37pm
Trends occur on all time frames. I can find trends on 5 minute charts, 60 minute charts, or daily or weekly charts. I don't care. I can find them.

Maybe you can't. But that doesn't mean that others can't.

An important thing about trends is that you don't need to get the whole of a trend for it to have been your best buddy. My trading style is to capture segments of the dominant time frame trend. Segments.

So, if one can detect a trend, why is it ones friend?

Because:
- The thrusts inside the trend are longer in the direction of the trend than against it on average.
- Your timing doesn't need to be as good when trading in the direction of the trend as when trading against it. If you fail to exit at the top of a thrust with the trend then the chances are that the retracement won't reach your well placed stop before there is another thrust. Whereas if you fail to exit at the end of a countertrend thrust then the retracement will probably take you right past your stop.

Its like being able to bet on a horse race at the opening odds but wait until 1/3rd of the way through the race to choose your horse - the trend is your friend.

Just a countertrend opinion
  • #13
  • Oct 20, 2007 1:28am Oct 20, 2007 1:28am
Quoting Micro-MiniMe
Everywhere a new trader goes the sounds of cute little trading proverbs fill the air......
Micro, excellent post!

A random generator like coin tossing will produce "trends" of successive heads, or successive tails, but (just like you say) the "trend" has an equal probability of either continuing, or ending, at any point. Traders adamantly reject the "random walk" theory. But if (and I stress, IF) a "trend" can emerge completely out of the blue, and has an equal probability of ending at ANY point, then that's effectively saying that price movement is a random walk.

At any given point, if price has an approximately 50% chance of continuing in the same direction, and a 50% chance of reversing, then there is no system in the world that can possibly operate profitably. That's plain common sense. If, however, there are certain patterns (James16 adherents might advocate pin bars at a PPZ, for example) that lead to a significantly greater than 50% probability of a price moving in a certain direction, then we have a phenomenon that can potentially be profitably exploited (assuming it operates consistently enough, on balance, to allow costs to be overcome). That is also assuming that what has occurred in the past, is more likely than not, to recur in the future. All TA is in some way based on that premise.

I may be pre-empting your next point "cut losses short and let profits run". It should be logically self-evident that this approach to exit will enhance profitability only to the extent that prices are "trending". Let's think about it. If, hypothetically, price was to trend indefinitely, maximum profit would be obtained by riding the trend for as long as possible. Conversely, if once price starts to move against a position, the probability of a continued adverse move ("trend") exceeds the probability of a reversal, then losses are minimized by exiting ASAP.

However, in a "ranging" market (i.e. reversion to, and possibly beyond, a mean), the opposite necessarily applies, i.e. take profits quickly before price reverses; let losses run (and possibly even average downward into a position) because the probability of a recovery exceeds the probability of the adverse move continuing.

For whatever it's worth, I go into all this in detail here: http://www.forexfactory.com/showpost.php?p=1452677

As you point out, at the right edge of the chart, we have no way of knowing whether we are entering a "trending" or "ranging" (or "hybrid") phase. (Incidentally, many EAs are not intelligent enough to hunt out "non-random" setups and hence ultimately count on either "trending" behavior occurring more often, on balance, than "ranging"; or vice versa. Perhaps that's one reason why many of these EAs eventually self-destruct.)

If we can disprove the "trend is your friend" as being valid, then "cut losses short and let profits run" must necessarily fall with it. As must the idea that "exit is more important than entry". If an exit method can not be shown to in some way statistically improve the probability of profit, then it becomes a completely irrelevant part of the trading equation.

Let's summarize:

1. If "trends" occur randomly, and have an equal probability of ending at any point in time, then price movement is nothing more than a random walk, and the concept of a "trend" is an illusory one.

2. If price movement is a completely random walk, then a system that is "in the market" all the time, will always offer zero expectancy (before costs), no matter what its entry algorithm is, and no matter what its exit algorithm is.

3. If trends don't exist, then the maxim "cut losses short and let profits run" is worthless.

4. If an entry/exit system doesn't deliver positive expectancy, then no amount of MM (position sizing, betting method etc) or psychology (discipline, patience, courage, perseverance, positive thinking, etc) can ever deliver long term profit.

The bottom line is that randomness plus costs makes trading a negative expectancy game. IMHO that is a primary reason why so many traders (90%?, so I've read) end up on the losing side.

Those are some of the theoretical implications, at least as I see them.

David
  • #14
  • Oct 20, 2007 2:11am Oct 20, 2007 2:11am
Quoting Micro-MiniMe
My trading system is based on rules that run contrary to most of what I hear and read and it has performed very well on the GBP/USD for the last 3 months with a consistant average of 150 pips per week. I trade part time and sleep well EVERY night.
Micro-MiniMe: so you are going to trade next three months also with your ranging/momentum method/system to base your trading decisions for GBP/USD?
  • #15
  • Oct 20, 2007 3:11am Oct 20, 2007 3:11am
It may be a case of semantics, but I feel perhaps we could use alternative terminology to differentiate what we are looking at on multiple time-frames.

Whenever we look at charts, especially on the daily and longer ones, we can see the dominant Trend. It would be hard to argue against the fact that, over the last couple of years, the Euro has been gaining in strength against the Dollar. Therefore, even if you trade the 15 min chart it makes sense to be aware of the dominant trend and either only trade when your signals indicate that the trend (long-term) has been resumed, or accept that, if you're trading the EUR short, your trade may have a shorter shelf life than you had planned.

Those who can judge, and profitably trade, when and where a correction is happening have a level of skill beyond many newcomers to trading. I think that this is the prime reason the % of failed traders is so high (assuming the figures are remotely accurate). They have no understanding that there are trends on every time-frame, but short-term trends needed to traded with Directional signals that are more powerful than a simple MA cross-over.

Couple this with the typical poor MM that a newbie brings to the game, and their fate is almost pre-ordained.

So my input is this. You have two concepts here: Trend and Direction. They require different mindsets, but are not mutually exclusive. A skilled trader will understand which of the two he/she is playing at any given time. The newcomer won't.

Discuss.
  • #16
  • Oct 20, 2007 3:12am Oct 20, 2007 3:12am
Quoting hanover
Micro, excellent post!

A random generator like coin tossing will produce "trends" of successive heads, or successive tails, but (just like you say) the "trend" has an equal probability of either continuing, or ending, at any point. Traders adamantly reject the "random walk" theory. But if (and I stress, IF) a "trend" can emerge completely out of the blue, and has an equal probability of ending at ANY point, then that's effectively saying that price movement is a random walk.

At any given point, if price has an approximately 50% chance of continuing in the same direction, and a 50% chance of reversing, then there is no system in the world that can possibly operate profitably. That's plain common sense. If, however, there are certain patterns (James16 adherents might advocate pin bars at a PPZ, for example) that lead to a significantly greater than 50% probability of a price moving in a certain direction, then we have a phenomenon that can potentially be profitably exploited (assuming it operates consistently enough, on balance, to allow costs to be overcome). That is also assuming that what has occurred in the past, is more likely than not, to recur in the future. All TA is in some way based on that premise.

I may be pre-empting your next point "cut losses short and let profits run". It should be logically self-evident that this approach to exit will enhance profitability only to the extent that prices are "trending". Let's think about it. If, hypothetically, price was to trend indefinitely, maximum profit would be obtained by riding the trend for as long as possible. Conversely, if once price starts to move against a position, the probability of a continued adverse move ("trend") exceeds the probability of a reversal, then losses are minimized by exiting ASAP.

However, in a "ranging" market (i.e. reversion to, and possibly beyond, a mean), the opposite necessarily applies, i.e. take profits quickly before price reverses; let losses run (and possibly even average downward into a position) because the probability of a recovery exceeds the probability of the adverse move continuing.

For whatever it's worth, I go into all this in detail here: http://www.forexfactory.com/showpost.php?p=1452677

As you point out, at the right edge of the chart, we have no way of knowing whether we are entering a "trending" or "ranging" (or "hybrid") phase. (Incidentally, many EAs are not intelligent enough to hunt out "non-random" setups and hence ultimately count on either "trending" behavior occurring more often, on balance, than "ranging"; or vice versa. Perhaps that's one reason why many of these EAs eventually self-destruct.)

If we can disprove the "trend is your friend" as being valid, then "cut losses short and let profits run" must necessarily fall with it. As must the idea that "exit is more important than entry". If an exit method can not be shown to in some way statistically improve the probability of profit, then it becomes a completely irrelevant part of the trading equation.

Let's summarize:

1. If "trends" occur randomly, and have an equal probability of ending at any point in time, then price movement is nothing more than a random walk, and the concept of a "trend" is an illusory one.

2. If price movement is a completely random walk, then a system that is "in the market" all the time, will always offer zero expectancy (before costs), no matter what its entry algorithm is, and no matter what its exit algorithm is.

3. If trends don't exist, then the maxim "cut losses short and let profits run" is worthless.

4. If an entry/exit system doesn't deliver positive expectancy, then no amount of MM (position sizing, betting method etc) or psychology (discipline, patience, courage, perseverance, positive thinking, etc) can ever deliver long term profit.

The bottom line is that randomness plus costs makes trading a negative expectancy game. IMHO that is a primary reason why so many traders (90%?, so I've read) end up on the losing side.

Those are some of the theoretical implications, at least as I see them.

David
I was just about to post something along the same lines, but you've laid out most of my thought before me.
A few additional points, there is a "rumor" going around, being cited as a major advantage of forex: "currencies trend more than any other market" or something along those line. I've recently read an article in Currency Trader magazine : www.currencytradermag.com (latest issue) (it's free) which basically disproves it. I quote:

"Nevertheless, from this longer-term
perspective, there’s no basis from which
to argue these currencies have better
trend characteristics than the representative
instruments they were tested

against" (tested against S&P 500, Boeing and 10-year T-note)
I believe that markets are for the most part random. One of the obvious exeptions, are times after major news releases. Not only is the initial surge in price obvious, but the following price action is usually rather predictable... That's why i personally trade the news

Best of luck,

Vlad
  • #17
  • Oct 20, 2007 3:57am Oct 20, 2007 3:57am
Peter and benssol basically already said it

The sooner people start ditching these 5 minute trend misconceptions and start using proper vocabulary, the better imho.

There is only one trend, period. You can't have a pro dollar trend and an anti-dollar trend at the same time. It's a binary logic since the market only knows two directions. No, there is no third; sideways is not a direction, it's the absence of direction.

That not all ticks tick in the direction of the trend is obvious, that's just how it is. People take profit, some people think they are smarter than the trend: so there are corrections and consolidations.
The trend shrugs, waits a bit and resumes.
Direction may change during this time for a short while, then the trend resumes => see benssol's post.

You will still get 20-40% more pips moved pro-trend on the chart in toto than counter-trend. You can of course always trade any and all directions you choose, but that's personal preference and timeframe preference.

As for the "indefineability" myth: You can define a trend with trendlines, that's why they're called trend-lines.
Simply because some may not yet grasp the how and why(please don't feel insulted neither if this actually does apply, nor if it doesn't, the point was to say it will all come to you..) does not mean the thing itself is obscure or non-existant.


Trends don't just start and stop out of nowhere. They are technical(or if you're from the other side, fundamental) and defineable. And although you might see rule bending(some moves go a bit below a trendline, some stop a bit shy of it, etc), in the end there is no really gigantic rule breaking.

And as always: if things run your stop, then don't blame the market, blame your entry. Stop size does not matter. Entry with a setup does(WHY enter here).

Side note - to actually mention the whole "well just use wider stops / avoid whiplashes" etc stuff is still so deeply stuck in MA crossover land thinking(or any comparable "enter in the middle" system approach) it hurts.
Different headspace. In that mindset, the market is unknown to you and an indefineable enemy. You can only perceive it with the help of translators => indicators, since it is so foreign, and one can only hope to cope by taking all defensives thinkable.
That's actually sort of the tone of the whole first post.

The misconceptions are really in that very thing. That the market is some sort of random walking, trader stalking beast. IMHO the market really couldn't care less who the John Doe trader is, and there is also no broker or single market maker out to get you.
Reality check: you(as in one, anyone trading retail) are just too darn small to be even noticed and individually taken care of by a trillion turnover market. (that your broker may still hate you, slip you, give you bad feeds and ticks does not belong in this category obviously, that's about broker houses, not the market)

And about the topic: here are some things I think that people "know" are wrong:

 

  1. "It is impossible to tell with much certainty if and when a trend has started" / "The trends come and go quickly most of the time"

Trends don't "come quickly" or go quickly. Selling the dollar has been a theme for years. The timeframe to look at and work with imho is weekly.
And no, that you(generalized you) are trading the 1 Minute will not mean you have a different "trend". It just means you are using a wrong terminology in my eyes.(I'm sounding pretty harsh today aren't I)

You might be trading an isolated move, a retrace, a direction or really just the quite wide band noise that exists within the big main move.

You can of course always pretend that there's 50 trends within a trend, but does that HELP you? Does that SIMPLIFY? Does that make it KISS?

No?

Then why stick to a conception that COMLPICATES things instead of ditching that mess and breaking things down to something that let's you trade without headaches of worrying about 50 conflicting factors?

Because that's really what the stubborn insistence on trends within trends IS - a great excuse towards why everything is oh so difficult. I've read enough "pair threads" to know the way people talk about it and everyone keeps finding reasons external to them why things are so hard and never work etc.

Here's the bottom line - it isn't the market making it hard. It's you. Everything in trading is about the mind. Took me long enough to figure it out, but there it is. My conviction at least.

Once you stop blaming others and start looking for reasons within yourself why things aren't working as smoothly as they should, you'll progress.
Why?
Because you can't change the market, but you darn well can change yourself.

Hm. This mini-essay would really do well in the beginner section I thinks

Oh well. On with the rest of the mop up.

 

  1. "You can't pick bottoms or tops, the market's sooooo unpredictable and how we're even able to enter or trade, heck, we all don't know.

(just had this discussed so I'm mentioning it)
Erm. Okay. Oddly enough, some traders do just that, enter with reversal setups at crucial junctures(at the end of a retrace to re-enter into the main direction/trend), ride out a full swing leg, exit. There are plenty examples around and it can be done in more than one way. Some people find the market so much predictable they can even make money counter-trend. Yes, the world is a crazy place.


Hm. While we're at it:

 

  1. A varying stop size means more money at risk.

Nah. Fixed percentage on a varying amount of pips = constant risk size.

 

  1. You can't trade a pair if you don't know it's fundamentals.

People can trade a pair without fundamentals as well as even without a chart

 

  1. There is only one right way of doing things

There is only one right way of doing things for YOU, there are as many ways to trade as there are people.


--

Okay. Well really I was just passing time while eating breakfast. Your fault to have a thread alive on the weekend!

Btw, this was not aimed at or against any individual(nor the thread starter as a person), please do not feel offended from me/my posts.
I'm just randomly tossing out personal misconceptions about my perceived reality
I am always a sarcastic grouch after waking up, so I blame nature(not the trend).

Trust price. Know yourself.
  • #18
  • Oct 20, 2007 4:11am Oct 20, 2007 4:11am
Quoting StockKJay

But you are still trading the major trend. I think that is the key. Many people do, most are not successful, trade those intermediate trends and short trends as their own being.
the major trend and the other two types must be set by you, it's your direction or your method

say you are a very long term player your set will be for example
Major Trend: Monthly, Intermediate:Weekly, Shortaily
so what you will do for example: when the Monthly trend is Uptrend you will wait for the Weekly to be uptrend too, then search for long entry on the daily and you never ever think in shorting whatever the price drops, you just wait until the correction is over

so your reference here are the monthly

someone else will set it as
Weekly, Daily, 4H

even in daytrading you must use the same set
for example
4H, 1H, 15M or 15M, 5M, 1M

and the same rules must applied

so the major trend doesnt mean always the bigger TF

and daytrading dosnt mean always the loss or the failure
if I'm a full time trader
then I can do both, the long/short term trades and
monitoring my long term positions dosnt need a lot of time, as we say in the stocks, EOD trading
you need 1 hour to scan 50 markets every day

and I think every trader must do the longterm type
coz if you're a fulltime trader you have the time for all types(long/short) and if you've another job you're forced to trade longterm only coz you dont have the time for daytrading

the point is both are working and profitable

may be longterm are easier, relaxing, save you time and short term need the full focus, the time, choosing the suitable market, the suitable equity
but both types working .....
  • #19
  • Oct 20, 2007 7:20am Oct 20, 2007 7:20am
The response to this thread is more than I had hoped for. Great points were made by all.

I must oppoligize for the title of this thread. I admit it was designed to attract attension and provoke response. A more appropriate title would be "Nothing in 4X is 100% right". Also in regards to trends, "The trend is not your friend, just an aquaintance".

Here's one point that I didn't stressed enough before. Look at a daily chart of GBP/USD. If we count any five bars at a time, how often do these bars clearly go with the major trend? How many bars are needed to determine that there is indead a trend, up or down? I say 3 minimum. How often does any one of the trends we can quickly identify last after it has been clearly identified? My original point stands. By the time most trends can be identified ON ANY TIMEFRAME, they are almost over. You can make it into rocket science if you wish, but I see what I see.

Hell, I'm no fool! If I see a clearly defined trend I'll sell my first born to go with it. Frankly, I'd rather wait for a lunar eclipse.

Now look a an hourly GBP/USD chart. To me, price spends most of it's time in channels on the 1HR chart. The channels tend to stay within longer term ranges and occasionally move up or down to new levels of support and resistance. I can visualize many small trades on the 1HR using a range/channel based system but a trend based system has me sitting on my thumbs most of the time waiting for 'The Big Trend That Got Away!' Sounds like a fish story, eh?

One final note: A good productive debate requires that two sides to a story be discussed. This has been a good debate. Thank you.
  • #20
  • Oct 20, 2007 8:37am Oct 20, 2007 8:37am
One thing I look for is the pairs ability it have consistancy in price action.

Tight chart with persistent price action both during the thrust and pullback.

Wide and loose charts mean stay out.

One suggestion I'd make is this..
turn off every indicator and just study price action I personally like bar charts as they show me the consistency much better. Look for trend qualifiers that you might create some rules for. Notice the thrust, pullbacks, tightness or lack of. Look for entry points out of consolidation areas. Look for higher highs and higher lows. check for support and resistance. Look for wide bar days and inside. Study this and I'd be willing to bet you will begin to develop a different perspective on things. I'm not saying trade like this but often most get so consumed with indicators they forget what it is that drives the indicator. Will this study take longer then a few minutes? Yep, it will take a good while to learn.

Well hope this might help someone and I do believe price is the only confirmation we need, but just my opinion.
Check Mate GAME OVER
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