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The trend is your friend Myth?

  • #61
  • Oct 21, 2008 8:21am Oct 21, 2008 8:21am
Trend IS your friend! A trendline + bollinger bands can greatly improve your chances of reaping serious profit while identifying trading range. Then, if you add and utilize triangles , you could be on your way to fortune........

Be Patient!
Sincerely,
~The constititution~
  • #62
  • Oct 21, 2008 9:42am Oct 21, 2008 9:42am
80, 90, 99% (pick a number) of "traders" fail because they believe they can trade against the trend.

Nothing is every absolute so there are times trading against the trend will work. But if the tide is rolling in and you are swiming out (like Mr Buffett) you better have the lungs or you will drown.

Trading is all about probablilites. If the odds favor one thing and you favor another, guess what?
  • #63
  • Oct 21, 2008 10:29am Oct 21, 2008 10:29am
Quoting Kosomolate
I have an issue here which is, how can I recognise a trend that is going to stay for a very long time? can any body come up with an indicator that can help me in this direction. cos some times before I know it is a trend it is almost over and going back. I will appreciate your explicit response. I am only 3 months in active trading after a year of demo trading, and I am still finding it tough
Hi Koso, just to let you know you're not alone. Cos me too looking for the answer and asked the same question. You know you alway get the "nobody knows ......." reply

If I find something I'll let you know.
  • #64
  • Oct 21, 2008 10:37am Oct 21, 2008 10:37am
If only it was as easy as an indicator telling you when a trend will end.

ADX tells the strength of a trend and is right about the same amount any other indicator is, which means never 100%. So experience and judgment and other confirming factors are needed.

Even then it is only what the percentages say may happen.
  • #65
  • Oct 21, 2008 10:57am Oct 21, 2008 10:57am
Quoting SunTrader
80, 90, 99% (pick a number) of \"traders\" fail because they believe they can trade against the trend.

Nothing is every absolute so there are times trading against the trend will work. But if the tide is rolling in and you are swiming out (like Mr Buffett) you better have the lungs or you will drown.

Trading is all about probablilites. If the odds favor one thing and you favor another, guess what?

Granted, but how many traders blow their accounts by trading with the trend and not using a stop loss, because 'the trend is your friend'? Contrarian trades work when public opinion is completely one-sided, when your Gran is calling you up and telling you to get some of the action, when buying power is exhausted - no-one is left to buy above you to take price higher. At this point the market movers are getting their short positions ready.

You attribute the vague number of traders who fail, apparently all of them, to their belief that they can trade against the trend. A bit of a generalization I'd say. Contrarian traders probably do just as well and as badly as trend traders, what they lack on success% they make up in R:R. Long term-trend traders on GBPJPY and EURUSD are toast. How long before they abandoned their assumptions that the trend would last forever? I believe holding these false assumptions longer than necessary has caused many more blown accounts than trading against the prevalent trend. Trends end. The potential rewards for getting in at the bottom or top are magnificent. Opportunities exist in both directions.

We must also consider what is the payoff if the trend continues and if the trend breaks down. Say there is a 70% chance the trend will continue - almost everyone would take long positions right? Hold your horses, we've only got one part of the equation. Say the payoff on the trend continuing is 5 points, but the payoff on the trend ending (of which P=0.3) is 30 points, then the profitable strategy, albeit one that you do not expect to occur as often, is to trade against the trend.

I do not advocate going against the trend just for the sake of being a contrarian. Go where the money is and don't get to the party too late. If you do, then wait for the next one. Timing is everything. You don't want to be the one taking the other side of the market movers positions. Somebody has to, just don't let it be you.

Personally I think Buffet has jumped the gun big time, but he's got the coin to weather the storm.
  • #66
  • Oct 21, 2008 11:13am Oct 21, 2008 11:13am
I didn't mean to give the impression that I believe all X percent of losing "traders" are comprised of ones who trade with or who fight the trend.

But of many years reading this and other forums comprised of posts of "traders" calling tops and bottoms (myself included back in the day) that turn out to not to be the top or bottom, tells me many are not going with the trend.

"traders" = aspiring not actual traders.
  • #67
  • Oct 21, 2008 12:39pm Oct 21, 2008 12:39pm
Trend trading is about following the trend not leading the TREND so if some one tries to call the top or bottom, that is highly speculative and to me that is TREnd Leading.

Important wait for the trend to form then follow the TREND, Not LEAD the TREND.



Quoting SunTrader
I didn't mean to give the impression that I believe all X percent of losing \"traders\" are comprised of ones who trade with or who fight the trend.

But of many years reading this and other forums comprised of posts of \"traders\" calling tops and bottoms (myself included back in the day) that turn out to not to be the top or bottom, tells me many are not going with the trend.

\"traders\" = aspiring not actual traders.
  • #68
  • Oct 21, 2008 9:44pm Oct 21, 2008 9:44pm
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.
I think Rob meation about the small trend is if you using the stochastic.

Quote
First, I try to trade a trend early. Second, I jump out of losing trades quickly. Third, I add to my winning positions.
for this part. the lesson I learn is wait until all indicator comfirm. never ever to chase the trend even it is look good to do so.
  • #69
  • Oct 21, 2008 10:15pm Oct 21, 2008 10:15pm
Rob was referring to the cliche "The trend is your friend", not about any particular indicator or any size of a trend. Then he describes later in the article his method of trying to get in a trend early.

Quoting mtuppers
I think Rob meation about the small trend is if you using the stochastic.

for this part. the lesson I learn is wait until all indicator comfirm. never ever to chase the trend even it is look good to do so.
  • #70
  • Oct 21, 2008 10:28pm Oct 21, 2008 10:28pm
Are you assuming because Rob works for IBFX that he's a failed forex trader, or do you have actual knowledge of it? I attended one of his seminar's in Vegas 3 years ago and he said that over the next few years the $ is going in the tank - guess what, he was right! He said he was shorting the $ also, so maybe he made that nest egg and likes teaching/writing now more than trading. Have your heard Rob talk about trading? I have, and he is fantastic - he has a passion for it like no one I have heard before - beats sitting in front of a monitor all day.

As for your comment "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" - did you read the 2nd section "Trend Trading As Your Best Friend"?

He is saying in the 1st part about when the trend is not your friend, if you look at a chart and see a nice trend, so you say to yourself, "the trend is up, I'll buy!" Then the price tanks. So, then the trend wasn't your friend.

In the 2nd part, he is said the trend can be your friend if you get in early enough.

In summary, he saying the trend isn't always your friend, so therefore, the saying "The trend is your friend" isn't true - if you get in early enough it's your friend, but if you don't, it's not your friend.

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.
  • #71
  • Oct 21, 2008 10:52pm Oct 21, 2008 10:52pm
In Sept,2008 Futures Magazine article U.S. Dollar: Misery Finds Company Rob Booker says he has been long the U.S. dollar for months. "I haven't been correct," he laughs, but he still believes: Having benefited the most from five years of expansion, the euro stands to lose the most from the global slowdown; the bad news is already priced into the dollar; and in the sluggish world economy, demand for expensive European goods and assets will fall while demand for discounted U.S. goods and assets will increase.

Realize that magazine articles are written long before issues reach subscribers. I Hope Rob didn't bail on his long call on the dollar before the big up trend move that has now gotten underway.
  • #72
  • Oct 21, 2008 11:08pm Oct 21, 2008 11:08pm
Price should always confirm the indicator. Not the other way around.
  • #73
  • Oct 21, 2008 11:24pm Oct 21, 2008 11:24pm
Looks to me like he got in the trend early - practicing what he preaches.

Quoting SunTrader
In Sept,2008 Futures Magazine article U.S. Dollar: Misery Finds Company Rob Booker says he has been long the U.S. dollar for months. \"I haven't been correct,\" he laughs, but he still believes: Having benefited the most from five years of expansion, the euro stands to lose the most from the global slowdown; the bad news is already priced into the dollar; and in the sluggish world economy, demand for expensive European goods and assets will fall while demand for discounted U.S. goods and assets will increase.

Realize that magazine articles are written long before issues reach subscribers. I Hope Rob didn't bail on his long call on the dollar before the big up trend move that has now gotten underway.
  • #74
  • Oct 21, 2008 11:34pm Oct 21, 2008 11:34pm
Quoting eagle4x
Looks to me like he got in the trend early - practicing what he preaches.
As I said, hope he stayed in long enough for the big rally to take effect, otherwise he might have gotten in too early if his stops were taken out?
I don't know, maybe he counting his winnings and letting them roll.
  • #75
  • Oct 21, 2008 11:40pm Oct 21, 2008 11:40pm
The TREND can always be your friend if you look at it on a time specific basis.

You get a very strong TREND when you get at least two or three(example, daily, 4hr and 1hr) to line up in the same direction.

I also understand some of what you are saying about Rob, but honestly he has the talent as a speaker and a teacher because he has the charisma but a true trader NO.

Everybody can call a bull or bear run on the $ but do they have the guts to pull the trigger and trade it NO, that is why he came to the conclusion trading was not for him, decided to sell signals that did not work either and now he has found his CALLING using his charisma.

Not every teacher is a good trader, believe me i have me a lot of them.

Just like a used/new car sales man will sell you a FORD(found On Road Dead) but beilieve me he will not drive a FORD.

Quoting eagle4x
In summary, he saying the trend isn't always your friend, so therefore, the saying \"The trend is your friend\" isn't true - if you get in early enough it's your friend, but if you don't, it's not your friend.
  • #76
  • Oct 22, 2008 3:05am Oct 22, 2008 3:05am
Quoting jackt
Hi Koso, just to let you know you're not alone. Cos me too looking for the answer and asked the same question. You know you alway get the \\\"nobody knows .......\\\" reply

If I find something I'll let you know.
If you want to know how long will a trend stay in time, learn to use Fibonacci time zones because they can be of help. However, if it's pips you're talking about then I think there are three rules:

1. Trends begin after consolidations so when you open your trading station you don't look for trends to follow but instead for consolidations that will eventually break.
2. You don't need to get 100% of the trend, it's enough to get a portion of it (that is if your greed allows you).
3. Place your stops according to the timeframe on which you place your entry and derive your take-profit according to a bigger timeframe.

So, as you can see, the possible lenght of the trend is derived from a bigger timeframe than the one on which a breakout occurs after consolidation.

How do you derive it? Well, this is actually a bit subjective. There are two types of waves in technical analysis - impulsive and corrective. For impulsive waves you use Fib projections, for corrective waves you use Fib retracements. I used to work with my students a lot on these things as your view about the market (that is whether we are in impulsive or corrective territory) can only be formed by experience - but untill then - if your instinct doesen't tell you anything right away go to a bigger timeframe!
  • #77
  • Oct 22, 2008 8:30am Oct 22, 2008 8:30am
Quoting Parmalat
If you want to know how long will a trend stay in time, learn to use Fibonacci time zones because they can be of help. However, if it's pips you're talking about then I think there are three rules:

1. Trends begin after consolidations so when you open your trading station you don't look for trends to follow but instead for consolidations that will eventually break.
2. You don't need to get 100% of the trend, it's enough to get a portion of it (that is if your greed allows you).
3. Place your stops according to the timeframe on which you place your entry and derive your take-profit according to a bigger timeframe.

So, as you can see, the possible lenght of the trend is derived from a bigger timeframe than the one on which a breakout occurs after consolidation.

How do you derive it? Well, this is actually a bit subjective. There are two types of waves in technical analysis - impulsive and corrective. For impulsive waves you use Fib projections, for corrective waves you use Fib retracements. I used to work with my students a lot on these things as your view about the market (that is whether we are in impulsive or corrective territory) can only be formed by experience - but untill then - if your instinct doesen't tell you anything right away go to a bigger timeframe!
Hi Parmalat, thank-you for ur reply. You're a kind person. If not much trouble could you show some pictures. I like to know how you see consolidations and breakout (can you tell the likely breakout direction?). I also like to know how you train your instinct. Hope not asking too much..
  • #78
  • Oct 22, 2008 11:04pm Oct 22, 2008 11:04pm
Quoting jackt
Hi Parmalat, thank-you for ur reply. You're a kind person. If not much trouble could you show some pictures. I like to know how you see and breakout (can you tell the likely breakout direction?). I also like to know how you train your instinct. Hope not asking too much..
I think Parmalat mean either candle stick are trading with in a range, when the trend break out means it borken that range. or if you look at then trading range indicators, then it break out the range. that is signal to enter.

Quote
form Parmalat
2. You don't need to get 100% of the trend, it's enough to get a portion of it (that is if your greed allows you).
what I find is if you are not greedy, even if you trade 1 m chart, you still can make profit.

so if you trade 2 times a day, wait for 1 m chart to comfirm, go for 5 pip then that is 10 pip per day...

yes if you have decent account then like $5000 using $2000 to do trade for 10 pip that is $200 for easy money
  • #79
  • Oct 23, 2008 3:27am Oct 23, 2008 3:27am
Quoting jackt
Hi Parmalat, thank-you for ur reply. You're a kind person. If not much trouble could you show some pictures. I like to know how you see consolidations and breakout (can you tell the likely breakout direction?). I also like to know how you train your instinct. Hope not asking too much..
Sure, check my profile page and I think there's an address there of my former blog (which I used a few months ago to train students untill I realized that I'm losing too much time for too little money) and you'll see some breakout trades.
You train your instinct by witnessing various positions. There's no other way. I trained my instinct in two years and I'm still training it even if by now I can place a lot more winners + break-evens than losers. So in time when you see some type of position you will know what's likely to happen (somewhat like chess ...). I was accelerating this process with my students by showing them some typical positions that I encountered during my trading career and insisting more on positions that generate mistakes from traders than on positions that generate huge winners. This is my style - I consider space + time when placing a trade, I reduce risk to minimum and I get out at the first sign of indecision (even if I miss some big moves).
So if you're gonna read my blog (by the way - the result of the last trade shown there GBP/CHF was + 340 something pips) I have one post named "Diagram of a bear trap". I think it's password protected (and I also think the password is lessons06 or tajune12 or just swich 06 for 12 and you'll get it - dunno I forgot) so after you manage to find this password I think you'll also find some interesting pieces of knowledge. Don't worry it's not a commercial blog anymore - I had enough of teaching Forex, I'd rather teach brain surgery or psychiatry or something...
  • #80
  • Oct 23, 2008 3:39am Oct 23, 2008 3:39am
[quote=mtuppers;2298740]I think Parmalat mean either candle stick are trading with in a range, when the trend break out means it borken that range. or if you look at then trading range indicators, then it break out the range. that is signal to enter.

I believe that technical indicators are somewhat useless. Theoretically you can't define the specific (that is the market situation in our case) through the general (that is the numerical transformation of the market situation - aka technical indicators) without losing a lot of data. So following indicators strictly will take you to losses for sure.
However, a limited role of technical indicators exists and personally I use oscillators to confirm my 5th waves in Elliott Wave counts.
My opinion is that the only thing telling the truth is price action by itself; my wife doesen't have to break glasses and saucers so I can tell she's upset, I just feel that she's upset.
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