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Attachments: Trend Trading
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Trend Trading

  • #1
  • First Post: Sep 22, 2010 3:53am Sep 22, 2010 3:53am
Hello,

The EUR/USD looks like it's about to close higher than it has closed since early May. If this happens then that will be a new four and a half month high which is where (according to my tests) new highs and lows start to become pretty significant (statistically speaking). Higher highs and lower lows really start to matter around 4 to 6 months.

Large and sudden price movements are also statistically significant and the last large bearish weekly candle was 6 weeks ago, which is probably far enough in the past not to matter to much.

Sentiment is also important and according to OandA's open position ratio, 57.4% of retail forex traders are short, which is also a bullish signal.

If anyone is interested in trend following then they might be interested in following this thread.

For the sake of this thread, I'm going to trade micro lots on an account I have with GFTUK. I'm going to use a combination of the first two mechnical trading systems I have on my blog, Strange Curriencies I and Strange Currencies II: http://www.myforexdot.org.uk/Strange...iesSystem.html and http://www.myforexdot.org.uk/StrangeCurrenciesII.html

I'll be using the exit critieria in the first system, exiting when the market fails to make a new high for around 12 days and I'll add to positions if I start getting into profit as suggested in the second system.

Hopefully this will be the start of a long-term movement and will see new yearly highs
  • #2
  • Sep 22, 2010 4:18am Sep 22, 2010 4:18am
Quoting Davidee
Hello,

The EUR/USD looks like it's about to close higher than it has closed since early May. If this happens then that will be a new four and a half month high which is where (according to my tests) new highs and lows start to become pretty significant (statistically speaking). Higher highs and lower lows really start to matter around 4 to 6 months.

Large and sudden price movements are also statistically significant and the last large bearish weekly candle was 6 weeks ago, which is probably far enough in the past not to matter to much.

Sentiment...
Subscribing

Hope so Davidee,
Time hides Nothing
  • #3
  • Sep 22, 2010 11:19am Sep 22, 2010 11:19am
As the daily cahrt shows, EUR/USD was bearish until september 10th. After that time, it has started a strong bullish trend. I think it will record a new high in past 4 months.
  • #4
  • Sep 22, 2010 12:05pm Sep 22, 2010 12:05pm
Right I've just gone long 1 lot on the EUR/USD @ 1.3390.

The Forex doesn't close as it's 24hr, so I'll define the close as around 8pm GMT.

If we don't get a higher close in the next few weeks I'll close the position and take the loss, if we get a few new highs I'll keep the position open and add another lot.

That's all for today...
  • #5
  • Sep 25, 2010 4:54am Sep 25, 2010 4:54am
OK that's the weekend after two days into the trade.

The price has closed around 1.3490 so the position is now around 100 pips in profit, not much for a trend following system but not bad considering we're only two days into a trade that will last from a few weeks to many months.

The day after I entered this trade the price closed with my trade about 80 pips in the red. I could have therefore entered at a much better price had I chosen to wait for Thursday's retracement before entering in the direction of Wednesday's breakout, however my research shows that waiting for a retracement (on average) causes you to lose more than you win with currencies, but works great on indices. On currencies you miss to many opportunities by waiting for retracements because sometimes the price never comes back. There are far more dips on indices and the sudden breakouts are a lot less powerful.

I wasn't to bothered that my trade finished in the red yesterday, in fact it's to be expected. This is because I believe that 1. it's impossible to pick exact tops and bottoms and 2. whilst the market slowly difts in the direction of the long-term underlying trend there is a lot of randomness in the short-term. The price going a hundred pips or so against you early on doesn't therefore mean your trade isn't a good one, if you can't pick the bottom to enter long at and there is randomness the price going against you at sometime during your trade must therefore be expected. The only way you could expect to never be 100 pips in the red would be if you believed you could pick and exact top or bottom within 100 pips, and I don't believe people can - at least not consistently anyway.

If we don't get a new high closing price in the next few weeks I'll deem that to be a lack of follow through (as described in the mechnical system Strange Currencies on my blog) and I will be looking to close the trade, but if the price continues to make new highs I'll be looking to add another lot to the position on a close above 1.3700.
  • #6
  • Sep 25, 2010 12:06pm Sep 25, 2010 12:06pm
Hi,Davidee


I'm With you on this Method and hope we gain some pips and some knowledge along the way. I read all of your methods on your web site and all are interesting. Thanks for sharing and hope to add to your thread. God Bless MR D.
Jesus my Lord
  • #7
  • Sep 25, 2010 5:14pm Sep 25, 2010 5:14pm
Forgot to mention the 50 % retracement on the monthly chart from november 2009 is just above the current price and you may see some rejection of price in the short term. Then again it could just blow right on through. We'll see. God Bless MR D.
Jesus my Lord
  • #8
  • Sep 27, 2010 11:30am Sep 27, 2010 11:30am
Well, that's Monday over. The market doesn't look like it's closing at a new high today, see what it does tomorrow.
  • #9
  • Sep 28, 2010 11:37am Sep 28, 2010 11:37am
OK it's almost 8pm UK time again so lets call that Tuesday's close - it's made a new high again to close at about 1.3570ish so that's the trade 200 pips in profit so far... Reset to the number of days without a new closing high counter back to 0.
  • #10
  • Sep 29, 2010 10:26am Sep 29, 2010 10:26am
Hey David, I have a quick question on the exits for this method. Do you mean that you will wait 12 days of no new weekly high before exiting? If so what about big corrections. Would you still wait or is there more to it . Sorry but I'm a little confused. Thanks MR D.
Jesus my Lord
  • #11
  • Sep 29, 2010 12:42pm Sep 29, 2010 12:42pm
Quoting Mr D.
Hey David, I have a quick question on the exits for this method. Do you mean that you will wait 12 days of no new weekly high before exiting? If so what about big corrections. Would you still wait or is there more to it . Sorry but I'm a little confused. Thanks MR D.

I'll answer your question before I post the daily update.

You're talking about the system on my blog right? It's 12 days for a new high not a weekly high. Basically, you enter on the 80 - 120 breakout and only exit if you don't get a new high (or low if you're short) for 12 consecutive days. So you're basically exiting on a lack of follow through.

I'm not religiously trading this system on this thread, I'm just following the principles of system's 1 and 2 closely and making comments. I don't suggest you religiously follow my system either, rather I suggest that you read them, take what seems good to you, change it as you see fit, test it for yourself and make it your own. In my case I might go to 15 days or more before exiting if the market was just staying flat, but if there was a very, very large move against me backed by a change in market sentiment I'd exit much sooner, possibly after as little as 5 to 8 days.

Anyway I aim to start of using a leverage of 1:1. If it closes above 1.3700 I'll add another lot making it 2:1, and if it continues I'll add another lot and take it to 3:1. I could even leverage as high as 5:1 in a very strong, long lasting trend, but no more than that. I consider break even or a small loss a bad year. A 30% gain on my account a good and respectable year, and 100% gain to be awesome (with trend following those years happen now and again).
  • #12
  • Sep 29, 2010 1:19pm Sep 29, 2010 1:19pm
Well the market closed about an hour ago at about 1.3640 so it's up by about 70 pips again today.

If anyone is interested there was a great article on forexblog.org today http://www.forexblog.org/2010/09/bul...-the-euro.html I hope they're right.

It's always good when the news supports your position, but I never trade it. You see, all you can know (I think) is how the market 'should' react to the fundamentals, but it doesn't always react they way it 'should'. So even if you can predict what the fundamentals will say it doesn't mean you can predict what the market's reaction will be.

The only fundamental I'll look at is sentiment indexes. OandA says 60.44% of retail traders are short right now. I think the majority of small retail traders are trying to pick a top and that the big money must be on the other side of that, so I consider that a bullish signal too. But ultimately it's about what the market actually does, it's always about what the market actually does.
  • #13
  • Sep 29, 2010 5:04pm Sep 29, 2010 5:04pm
Thanks David , I re-read the Strange 1 and 2 methods and I understand better what you are trying to do. I like the simple and straight forward way you explain everything. I am trying to frame these longer term methods to fit me as you say and Its coming together quite well. Thanks again David for all your help. Regards MR D.
Jesus my Lord
  • #14
  • Sep 30, 2010 12:15pm Sep 30, 2010 12:15pm
Quoting Mr D.
Thanks David , I re-read the Strange 1 and 2 methods and I understand better what you are trying to do. I like the simple and straight forward way you explain everything. I am trying to frame these longer term methods to fit me as you say and Its coming together quite well. Thanks again David for all your help. Regards MR D.
Thanks MR D. You really need to frame these proven methods to fit you. A blend of the first two systems suits me and my personality and goals so for me following this trade is proving to be fairly easy. I plan on writing down exactly what features I think the best edges and trading systems have later and let you see the list if you like?

Anyway, the market has moved a lot today only to close about the place it opened at. But I'll count it as 1 day without a new high.
  • #15
  • Sep 30, 2010 1:16pm Sep 30, 2010 1:16pm
Ah missed the thread David, good I found it eventually, subscribed. Good luck mate!
Trading = a mirror to your human flaws. Fix them or be fixed.
  • #16
  • Sep 30, 2010 2:04pm Sep 30, 2010 2:04pm
Yes David I agree following along is basicly stress free and pretty much mechanical. I will be interested to see all you write as you go along. I always make more money when I'm not glued to the computer. I got in at 1.3350 and never went into drawdown.It went up right away and then re-traced almost back to even and now about 270 pips up with no stress. Thats so important Thanks so much David. best regards Darrell
Jesus my Lord
  • #17
  • Oct 1, 2010 11:28am Oct 1, 2010 11:28am
Quoting soso
Ah missed the thread David, good I found it eventually, subscribed. Good luck mate!
Thanks man
  • #18
  • Oct 1, 2010 11:49am Oct 1, 2010 11:49am
Quoting Mr D.
Yes David I agree following along is basicly stress free and pretty much mechanical. I will be interested to see all you write as you go along. I always make more money when I'm not glued to the computer. I got in at 1.3350 and never went into drawdown.It went up right away and then re-traced almost back to even and now about 270 pips up with no stress. Thats so important Thanks so much David. best regards Darrell
Glad you caught the trend early and got in at a good price, it's always nice when that happens. However a friendly word of advice. Don't expect no retracement to be the norm, it's not. It's pretty much impossible to pick and exact top or bottom, so if the price goes against you it doesn't mean you were 'wrong'. Essentially you are right if you can call the direction of the long-term trend and can stay with it until you get a proper lack of follow through signal and/or a trend reversal signal.

Anyway its only 7:45pm here but it's Friday, I'm home from work and going call that the close for the week in the UK.

The trade is now around 380 pips in profit. The market is around 1.3770 which is above 1.3700. I said if the market closed above 1.3700 I'd buy another lot, and that is exactly what I have done. Lot number 2 long at 1.3770(ish).

I don't recommend using leverage above 1:1 to start with, but if the trade continues to go your way I think you can add lots until you're leverage somewhere between 3:1 and 5:1.

As a side note, according to OandA, 62.82% of retail traders are short - retail shorts now out number retail longs by almost 2 to 1. I believe the big money must be on the other side of those tradesr and that the retail traders are just trying to pick the top. Eventually they will (by luck) pick the top because all trends eventually end. But whilst the trend is in place it's more likely to continue than not and I don't believe you can say much more than that. In fact, when a strong trend emerges on a large liquid market like the EUR/USD it actually takes a lot to stop it. But that still doesn't mean it couldn't end in the next 5 minutes, only that it is more likely to continue than not.

Good trading & thanks for all your replies
  • #19
  • Oct 1, 2010 1:02pm Oct 1, 2010 1:02pm
The strategies of this thread could make many traders sucsesful if just they had patience enough to follow them. Very valueable strategies that many can find something useful in. I find the exit methods interesting that could probably improve my trading. Thanks for sharing.
  • #20
  • Oct 2, 2010 2:58pm Oct 2, 2010 2:58pm
Quoting Davidee
Glad you caught the trend early and got in at a good price, it's always nice when that happens. However a friendly word of advice. Don't expect no retracement to be the norm, it's not. It's pretty much impossible to pick and exact top or bottom, so if the price goes against you it doesn't mean you were 'wrong'. Essentially you are right if you can call the direction of the long-term trend and can stay with it until you get a proper lack of follow through signal and/or a trend reversal signal.

Anyway its only 7:45pm here but it's Friday,...
I wonder have you tried to trade the I strategy using piramiding not just opening one position as it is written now??
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