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The trend is your friend Myth?

  • #41
  • Oct 16, 2008 9:29pm Oct 16, 2008 9:29pm
Quoting Rastaman
This may sound like a stupid question but, are we actually trading minor reversals of the long term trend and not the trend itself?

If you look at this chart on USD/JPy it is easy to see that the trend has been down since 1982. Yet, \"the trend is your friend\".
Isn't any successful trader actually trading a reversal in the long term trend and not the trend?
Rather like looking at something that to the naked eye appears smooth but when looking at it under a microscope it appears jagged with peaks and valleys.
Are we basing the trend simply on Macro and Micro viewpoints?

Ah, so many questions.

http://img390.imageshack.us/img390/3230/trendfj3.jpg

Well, first it depends on the pair. You chose the U/J which is known to be the most manipulated pair of all the majors. If it weren't for the BOJ and this pair were completely free-floating, then it might trend more.

There are pairs that trend much more like the other JPY crosses (EUR/JPY or AUD/JPY). Also EUR/USD trend a lot!

What is meant by trend is not merely the direction, but all the strength of a trend. There are stocks that trend better than fx pairs in terms of direction. However, it wouldn't take much to disrupt a stock's trend (i.e. bad earnings, etc). In fx, it takes a lot more to knock a trend of it's course. I don't know any other market where the trends, once they are in place, are as strong as they aere in fx.
  • #42
  • Oct 16, 2008 9:29pm Oct 16, 2008 9:29pm
Quoting 30XTCi
Clockwork, that chart was posted as a tongue-in-cheek joke, poke, at how easy it is (not ) to trade a trend under the current market conditions, in this time frame.
Consolidation is nothing more than a time frame travelling in the opposite direction to it's next highest time frame.When the consolidation is over, and the two time frames (cycles) align, we get the break out, as seen shortly after I posted. Cable and Euro were in a real mess yesterday, their cycles were totaly screwed, in everything under 1 hour, they spent most of the day fighting against each other.
I don't have any problems with sheeple trading \"a trend\"as they see it, as I posted elsewhere, we get paid to trade the future, not the past. What happened 2 hours ago isn't going to guarantee what will happen in the next 2 hours.

On a side note, has anyone noticed the lack of decent Threads here at the Factory. The place is being overrun by noobs that can't seem to think for themselves.

Anyway Clockwork, Good luck ( to those that believe in it ) and good trading, you are one of probably 20 on the boards that know what they are talking about.

Roy
Roy -

I suspected that you weren't being overly serious, but I pointed that out only so as to not to confuse the newer guys.....

Cheers!
  • #43
  • Oct 16, 2008 9:50pm Oct 16, 2008 9:50pm
Quoting hanover
Tugun,

I believe this is Jacko-speak.



David
Yes, it is. I didn't mean to say it was my words.

Sorry
  • #44
  • Oct 17, 2008 3:06am Oct 17, 2008 3:06am
Quoting 30XTCi
It screams at me go long no stops and take profit at 1.7910
I dont have the patience required to wait for 1.7910. So I stuffed 130 long in the bank plus a quick 36 short on the retracement.
Attached Image (click to enlarge)
Click to Enlarge Name: trend cycles1.jpg Size: 99 KB
Polishing my crystal ball
  • #45
  • Oct 17, 2008 9:29am Oct 17, 2008 9:29am
I believe the trend is your friend but when this friend cheats , you lose alot
  • #46
  • Oct 17, 2008 10:10am Oct 17, 2008 10:10am
Quoting aediaz1
Just remember there is no such thing as always in this business, if we exclude disappointments and broken accounts
That's why EWavers have X and Y waves. Thanks to their "guru" Robert Prechter who can never seem to get his market top predictions right. Mr Elliott never used them.

And originally EW theory didn't specify a Wave 4 couldn't trade into a Wave 1 as well as a couple of other "nevers". Only late in his life did he put absolutes on wave counts to satisfy the public.
  • #47
  • Oct 17, 2008 10:37am Oct 17, 2008 10:37am
Quoting SunTrader
That's why EWavers have X and Y waves. Thanks to their \\"guru\\" Robert Prechter who can never seem to get his market top predictions right. Mr Elliott never used them.

And originally EW theory didn't specify a Wave 4 couldn't trade into a Wave 1 as well as a couple of other \\"nevers\\". Only late in his life did he put absolutes on wave counts to satisfy the public.
X and Y are as clearly defined as any other wave. A lot of people think that X waves are something that EW people put in places where they dont know how to count. I dont understand how this wrong idea got perpetuated in the first place.

The "problem" with EW from the perspective of outside people is that since counts are changing therefore EW is not working, like they were expecting that EW people get it _always_ right and they shouldn't change their count. It's simply not true, and as your S/R levels get broken and you change your bias that's how we EW people change our counts. Simple as that.
Trading = a mirror to your human flaws. Fix them or be fixed.
  • #48
  • Oct 17, 2008 11:16am Oct 17, 2008 11:16am
Quoting SunTrader
That's why EWavers have X and Y waves. Thanks to their \"guru\" Robert Prechter who can never seem to get his market top predictions right. Mr Elliott never used them.

And originally EW theory didn't specify a Wave 4 couldn't trade into a Wave 1 as well as a couple of other \"nevers\". Only late in his life did he put absolutes on wave counts to satisfy the public.
1 thing that EW theory have taught me by watching others, is what believe do to people. The thing I don't understand with EW, is the "excuse" and every recount available if 1 out of the very many didn't work. I can't name a single person who caunted he's way to success

Second, when the creator of this theory didn't made a dollar on the theory, my only guess why it did become so popular must be; it looks exceptional well in hindsight. Even better than RSI, stochs etc etc.
Measure twice, cut once
  • #49
  • Oct 18, 2008 9:01pm Oct 18, 2008 9:01pm
Quoting soso
X and Y are as clearly defined as any other wave. A lot of people think that X waves are something that EW people put in places where they dont know how to count. I dont understand how this wrong idea got perpetuated in the first place.

The \"problem\" with EW from the perspective of outside people is that since counts are changing therefore EW is not working, like they were expecting that EW people get it _always_ right and they shouldn't change their count. It's simply not true, and as your S/R levels get broken and you change your bias that's how we EW people change our counts. Simple as that.
My criticism is not with EW. It is with how some apply it as well as IMHO X and Y are BS. Note I never said I don't use EW. I do.

But if one keeps in mind the objective is to use it to trade then they "discover" there is no need to label every zig and every zag. Only the important and true wave counts because sometimes the market just doesn't cooperate and move in definable waves.
  • #50
  • Oct 18, 2008 9:42pm Oct 18, 2008 9:42pm
Rastaman remember that there are reversal and pullbacks and continuations and most importantly reversals begin somewhere and start a whole new trend.
If you trade using the monthly good for you but remember that within every TREND there are smaller trends and smaller trends and smaller trends so use that common sense and maybe you will know how to determine what the trend is for the 1hr, 4hr daily and weekly because these add up to make the monthly trend.
Remember only 5% of traders really make good money trading forex.

wish you good luck


Quoting Rastaman
This may sound like a stupid question but, are we actually trading minor reversals of the long term trend and not the trend itself?

If you look at this chart on USD/JPy it is easy to see that the trend has been down since 1982. Yet, \"the trend is your friend\".
Isn't any successful trader actually trading a reversal in the long term trend and not the trend?
Rather like looking at something that to the naked eye appears smooth but when looking at it under a microscope it appears jagged with peaks and valleys.
Are we basing the trend simply on Macro and Micro viewpoints?

Ah, so many questions.

http://img390.imageshack.us/img390/3230/trendfj3.jpg
  • #51
  • Oct 18, 2008 11:50pm Oct 18, 2008 11:50pm
If you really want to trade with the trend, you need to know about how the markets rotate within the time frame you are trading.I'm posting a chart of USDJPY spanning the last 14 years. How observant are you?
Attached Image (click to enlarge)
Click to Enlarge Name: Monthly rotations.JPG Size: 66 KB
Polishing my crystal ball
  • #52
  • Oct 19, 2008 3:30pm Oct 19, 2008 3:30pm
Quoting SunTrader
My criticism is not with EW. It is with how some apply it as well as IMHO X and Y are BS. Note I never said I don't use EW. I do.

But if one keeps in mind the objective is to use it to trade then they \\"discover\\" there is no need to label every zig and every zag. Only the important and true wave counts because sometimes the market just doesn't cooperate and move in definable waves.
Point taken and feel exactly as you. Too many people try to count every turn in the market which is not really needed when trading, acually in my case find it is better to keep the count as simple as possible. it's like they say "can't see the forest for the trees".
Trading = a mirror to your human flaws. Fix them or be fixed.
  • #53
  • Oct 19, 2008 4:08pm Oct 19, 2008 4:08pm
Quoting 30XTCi
If you really want to trade with the trend, you need to know about how the markets rotate within the time frame you are trading.I'm posting a chart of USDJPY spanning the last 14 years. How observant are you?
That's neat. If you say that this pair is controlled by 3 wave moves then this is what I found out too for some time already.

Mmm and lemme throw some recent 4h snag showing 2 things: 1) 3 wave moves are still dominant and 2) the fractal nature of the move - you can go even lower and see that it is a fractal within a fractal, the same base fractal.
Attached Image (click to enlarge)
Click to Enlarge Name: jpy.gif Size: 11 KB
Trading = a mirror to your human flaws. Fix them or be fixed.
  • #54
  • Oct 19, 2008 7:45pm Oct 19, 2008 7:45pm
First chart for UJ previous 14 years or so shows all I need to see the trend if I were trading on a really longggg-term. But since I mostly daytrade and occasionally swing trade over "x" of days the second chart would be appropriate:
Attached Image(s) (click to enlarge)
Click to Enlarge Name: UJ.PNG Size: 30 KB
Click to Enlarge Name: UJ2.PNG Size: 26 KB
  • #55
  • Oct 19, 2008 9:28pm Oct 19, 2008 9:28pm
Here is an excerpt from an article by Rob Booker called Three Trend Trading Techniques" in the 10/08 issue of Stocks and Commodities Magazine:

"Imagine that centuries ago, a pilgrim set out on a mission to discover the secret of trading. He passed through deserts, thirsty for truth more than water. He descended into valleys where he met despair and then rose again more determined than ever. Finally, he scaled the steep walls of a massive mountain and met a teacher whose wisdom was sought by even the mightiest of traders. And when asked the secret of trading, the master teacher spoke only these words:

"The trend is your friend. Never trade against it."

And thus a myth was created. Mountains of trading literature have been produced about this one statement. But is it true?

Trend Trading As Your Worst Friend

I have found that the truth about trend trading is more complicated. Trading is deeper than just a platitude, and simple repitition of a falsehood doesn't make it true. The worst lie that we can tell is the one that we tell ourselves, and in this case, if you convince yourself the trend is your friend and it must be trusted at all costs, then you run the risk of great disapointment and huge drawdowns.

For example, what if you bought the gbp/jpy at 252.00 in the summer of 2007? (He then shows 1 chart - a 240m gbp/jpy up until summer of 2007).
That looks like a spectacular trend. Let's buy the pair!

Let's see what happens next. (He then shows a 2nd chart - a 240m chart from the summer of 2007 until now). Woops! The trend wasn't too friendly. In summer of 2007, I bought the gbp/jpy near the exact top and found that the trend was very unfriendly. To sum it up, the trend can be your friend, but when the trend get's angry, your friend knows you well enough to do terrible things to you.

Trend Trading As Your Best Friend

I've decided over the years that I can use a few simple techniques to make trend trading as friendly as possible, while still remembering that no trend lasts forever.

First, I try to trade a trend early. Second, I jump out of losing trades quickly. Third, I add to my winning positions."

Rob then goes on to give three techinques for trading trends.
  • #56
  • Oct 20, 2008 12:23am Oct 20, 2008 12:23am
First of all Rob Booker is a failed forex trader, when he could not succeed in trading he decided to start writing pdf files to make money and also send signals, he failed in that one also and now he has talked his way into being a consultant for ibfx(or should i say working for the broker).
He is part of the group that go around and give talks about how good it is trading forex to newbies using pivots on 30 mins timeframes and lower.

Ok the nonsense he is saying that the TREND is not your friend tells you right away he does not know what he is doing still.

Understand this once and for all traders within every big TREND there is a smaller trend and a smaller trend and a smaller trend and so on.

In a nutshell a good trend following trader know that TRENDS are time specific and sequencial in nature.

Why will a forex daytrader even try and trade from the monthly or weekly chart, it is good to look at those higher timeframes and use as a guide during our trading.

Find the TREND and trade with it and make some money instead some traders who are failing in their adventure starting topics like "TREND TRADING IS A MYTH"

In forex winning or lossing is up to you and common sense.

If the TREND is not your friend then since the stock market is TREND down right now, give me one hedge fund company that is willing to go against the TREND and start buying, no body wants to catch a falling knife.

What i see is most TRADERS do not even know how to determine the MAJOR, MINOR OR MINI TREND let alone trade successfully.





Quoting eagle4x
Here is an excerpt from an article by Rob Booker called Three Trend Trading Techniques\" in the 10/08 issue of Stocks and Commodities Magazine:

\"Imagine that centuries ago, a pilgrim set out on a mission to discover the secret of trading. He passed through deserts, thirsty for truth more than water. He descended into valleys where he met despair and then rose again more determined than ever. Finally, he scaled the steep walls of a massive mountain and met a teacher whose wisdom was sought by even the mightiest of traders. And when asked the secret of trading, the master teacher spoke only these words:

\"The trend is your friend. Never trade against it.\"

And thus a myth was created. Mountains of trading literature have been produced about this one statement. But is it true?

Trend Trading As Your Worst Friend

I have found that the truth about trend trading is more complicated. Trading is deeper than just a platitude, and simple repitition of a falsehood doesn't make it true. The worst lie that we can tell is the one that we tell ourselves, and in this case, if you convince yourself the trend is your friend and it must be trusted at all costs, then you run the risk of great disapointment and huge drawdowns.

For example, what if you bought the gbp/jpy at 252.00 in the summer of 2007? (He then shows 1 chart - a 240m gbp/jpy up until summer of 2007).
That looks like a spectacular trend. Let's buy the pair!

Let's see what happens next. (He then shows a 2nd chart - a 240m chart from the summer of 2007 until now). Woops! The trend wasn't too friendly. In summer of 2007, I bought the gbp/jpy near the exact top and found that the trend was very unfriendly. To sum it up, the trend can be your friend, but when the trend get's angry, your friend knows you well enough to do terrible things to you.

Trend Trading As Your Best Friend

I've decided over the years that I can use a few simple techniques to make trend trading as friendly as possible, while still remembering that no trend lasts forever.

First, I try to trade a trend early. Second, I jump out of losing trades quickly. Third, I add to my winning positions.\"

Rob then goes on to give three techinques for trading trends.
  • #57
  • Oct 21, 2008 2:39am Oct 21, 2008 2:39am
Quoting Verto
I seriously busted up laughing after reading the first few posts. I do see what you are getting at Rastaman I guess it really just depends on the type of trader you. I mean a scalper doesn't care about the trend, much less the monthly trend from the 80s. On the other hand neither does a swing trader half of the time.

It really just comes down to the timeframe you trade in. Be it hour, four hour, daily, monthly, YEARLY, haha.
I'm agree with you! timeframe is really important and we have to allow for it.
  • #58
  • Oct 21, 2008 3:55am Oct 21, 2008 3:55am
Quoting forextrend

If the TREND is not your friend then since the stock market is TREND down right now, give me one hedge fund company that is willing to go against the TREND and start buying, no body wants to catch a falling knife.

What i see is most TRADERS do not even know how to determine the MAJOR, MINOR OR MINI TREND let alone trade successfully.

"I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds." --Warren Buffett, October 16, 2008, New York Times
  • #59
  • Oct 21, 2008 7:25am Oct 21, 2008 7:25am
Quoting forextrend
First of all Rob Booker is a failed forex trader, when he could not succeed in trading he decided to start writing pdf files to make money and also send signals, he failed in that one also and now he has talked his way into being a consultant for ibfx(or should i say working for the broker).
He is part of the group that go around and give talks about how good it is trading forex to newbies using pivots on 30 mins timeframes and lower.

Ok the nonsense he is saying that the TREND is not your friend tells you right away he does not know what he is doing still.

Understand this once and for all traders within every big TREND there is a smaller trend and a smaller trend and a smaller trend and so on.

In a nutshell a good trend following trader know that TRENDS are time specific and sequencial in nature.

Why will a forex daytrader even try and trade from the monthly or weekly chart, it is good to look at those higher timeframes and use as a guide during our trading.

Find the TREND and trade with it and make some money instead some traders who are failing in their adventure starting topics like \\"TREND TRADING IS A MYTH\\"

In forex winning or lossing is up to you and common sense.

If the TREND is not your friend then since the stock market is TREND down right now, give me one hedge fund company that is willing to go against the TREND and start buying, no body wants to catch a falling knife.

What i see is most TRADERS do not even know how to determine the MAJOR, MINOR OR MINI TREND let alone trade successfully.
A trader will trade the weekly and monthly because 1) he can afford to and 2) because the bigger the timeframe - the better the moves are supported by fundamentals. So if you want the truth in Forex, you go to the monthly chart because that's the biggest timeframe available (to everyone not just individual traders) and if you see a breakout on the monthly chart clearly you shouldn't go against it's direction when scaling down charts for entries.
So your quote is correct (if you are with the trend, even if it starts to go against you it will eventually come back) but that is only applicable (tradeable) to bigger timeframes because bigger timeframes are well supported by fundamentals and fundamentals don't change in 2-3 weeks (as you can see, in the end it's all down to human needs like time) so if you're in a trend on the weekly and you get a retracement against your position you do have the chance of a comeback because fundamentals are actually the same! This is not the case on the hourly, 4 hour and even daily charts because even the slightest economic figure that comes in better or worse than expected can change the picture. But in order to change the picture on the weekly and monthly you need a whole set of data coming in better or worse than expected and this can only happen in time; untill that "time" passes, the prevailing trend is still in full force. I hope people reading this post understand what I mean
  • #60
  • Oct 21, 2008 7:41am Oct 21, 2008 7:41am
Quoting Parmalat
A trader will trade the weekly and monthly because 1) he can afford to and 2) because the bigger the timeframe - the better the moves are supported by fundamentals. So if you want the truth in Forex, you go to the monthly chart because that's the biggest timeframe available (to everyone not just individual traders) and if you see a breakout on the monthly chart clearly you shouldn't go against it's direction when scaling down charts for entries.
So your quote is correct (if you are with the trend, even if it starts to go against you it will eventually come back) but that is only applicable (tradeable) to bigger timeframes because bigger timeframes are well supported by fundamentals and fundamentals don't change in 2-3 weeks (as you can see, in the end it's all down to human needs like time) so if you're in a trend on the weekly and you get a retracement against your position you do have the chance of a comeback because fundamentals are actually the same! This is not the case on the hourly, 4 hour and even daily charts because even the slightest economic figure that comes in better or worse than expected can change the picture. But in order to change the picture on the weekly and monthly you need a whole set of data coming in better or worse than expected and this can only happen in time; untill that \"time\" passes, the prevailing trend is still in full force. I hope people reading this post understand what I mean
As someone who pays little attention to fundamentals, I agree with this statement 110%. It is because I have found comfort in trading 4 hour and daily charts that I do not use them. However, if I were to switch to weekly or monthly with low leverage, entries don't matter as much. (Think buying EUR/USD until recently for last few years.)

Good post.

Clockwork
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