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Attachments: Trend Following - A Complete Guide
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Trend Following - A Complete Guide

  • #21
  • Dec 17, 2010 11:02am Dec 17, 2010 11:02am
Hi thanks for sharing Micardo,

I am a great fan of trend following as it doesn't take up alot of time. I trade the Daily time frame so I will definitely follow your thread with great interest. Looking forward to point of entry/exit and hopefully some position sizing!
  • #22
  • Dec 17, 2010 12:26pm Dec 17, 2010 12:26pm
Hi Micardo,

Its nice to see a clean "refreshing" thread.

I trade trends intraday with similar concepts.

It will be nice to see how you perceive the markets with your experience and learn from you.

Keep it up!

Pip
  • #23
  • Dec 17, 2010 6:25pm Dec 17, 2010 6:25pm
Quoting thokthok
What about news? Does that have any effect on your trades.
For example, if you have any open position in fiber, have you adjusted it according the recent news of Euro-countries meeting?
News is an interesting one. Certainly if you are trading shorter timeframes it is going to have an effect and is something that you should be wary of, but on the longer term stuff you pay less attention to it. Of course you use common sense and if there is an important announcement coming out and you are about to enter a trade, you might decide to wait until after, but once you are in, you are in...

If you are trading dailies then the news is usually intradday noise and is not something that is going to change the trend.

Also you need to remember that technical trading is about an edge and probabilities. That means that you must trade every setup that you see because if you don't you may just miss that one big score that makes you some significant profit.

I hope that helps
  • #24
  • Dec 17, 2010 10:01pm Dec 17, 2010 10:01pm
I trade almost the same way. Would really like to hear more of your inputs.
  • #25
  • Dec 17, 2010 10:53pm Dec 17, 2010 10:53pm
the main concern i have for trend trading is the huge stoploss and the personal expectation of the market.
To trade trends... one will require a wide stoploss so as to avoid being stopped out by whiplashes and fake breakouts... any way to counter that?

thanks in advance =)

more good years ahead..........
  • #26
  • Dec 18, 2010 2:27am Dec 18, 2010 2:27am
Nice thread Micardo,

I absolutely love trading with support and resistance and trend analysis.

Subscribed.
  • #27
  • Dec 18, 2010 5:21am Dec 18, 2010 5:21am
People use candlesticks in many ways, I am not going to try and give an in depth candlestick course here as there wouldn't be enough time or space in this thread and it could literally be and indeed is a course all by itself, add that to the fact that I am not Steve Nison (The King of Candles), so I am not nearly qualified enough to give you the details regarding every candlestick pattern out there.

However I do use candlesticks and I will show you how I use them here.

First things first, I do not pay attention to every formation there is, I pay attention to a few reversals and thats it. These reversal patterns must occur at one of our previously identified support or resistance levels or we don't look at them at all.

OK so the few that I look for are the shooting star, the hammer, the doji and the bullish and bearish engulfing candles.

In an uptrend, we are looking for price to pull back to a support area right.. well when price gets back to our support area I would be looking for a hammer, doji and bullish engulfing to form, I would then take a break of the signal candles high as an entry, with a stop below the low.

In a downtrend we are looking for price to pull back to an area of resistance. When prices gets back to our reistsance area I would be looking for a shooting star, a doji or a bearish engulfing to form, I would then take a break of the signal candles low as an entry, with a stop above the high.

The important thing to remember about candles is that it is showing the price action for the previous period and hence who was in control. Therefore for example if we were to look at a shooting star, we would see that even though the bulls were in control for the first part of the candles life, by the end the bears tooks control and drove the price down which would indicate to us that the next period could in fact also be down and that the area of resistance that we are at is indeed significant. The opposite would be true of a hammer at support. So the real key to working with candles is really understanding what the candle is telling you. The name of the candle isn't nearly as important as the story the candle tells.

1 - Bearish Engulfing - The bearish candle body completely engulfs the previous bullish candle body

2 - Bullish Engulfing - The bullish candle body completely engulfs the previous bearish candle body

3 - Doji - Open and Close almost in the same place (in forex), indicates indecision

4 - Hammer - Long wick below the candle with small body on top

5 - Shooting Star - Long wick above the candle with small body on the bottom

I have included some images below but if you want more information on candles you do a simple search into google and you will get plenty more information if you need.
Attached Images
  • #28
  • Dec 18, 2010 7:47am Dec 18, 2010 7:47am
I love to see this type of thread. I trade in a very similar way. Michael Covel's book Trend Following is my favorite book by the way. I hope a lot of people take to this type of trading because in my opinion, it is the most profitable and least stressful. I posted some of my trading results before on some threads and got slammed because people did not believe me but with this method, it is very easy to make thousands of pips each month. Just ride the trend till she bucks you. If you analyse 20-25 pairs and find the best trends, you will never have to have a day job again. I think people feel as though it can't be this easy and they feel the need to add a bunch of indicators to make it seem "legitimate". I hope you can get to the traders on here because I could not.
  • #29
  • Dec 18, 2010 8:48am Dec 18, 2010 8:48am
Brenza I like the sound of that but have a few worries. What size are stop losses? Isn't it stressful having positions open for many days at a time? But probablly most of all how long does it take to analyse 25 pairs every day?!

On that topic Micardo can you give us a run-down on your start of the day routine? How long do you spend analysing the charts before taking a trade? And how exactly will you start the analysis of a pair? Do you draw trend lines on Daily then down to 5m? Is there any 'trending strength chart/indicator' you use to make sure you are looking at only the strongest trending pairs?

Many thanks
  • #30
  • Dec 18, 2010 9:59am Dec 18, 2010 9:59am
Quoting brenzaj42
I love to see this type of thread. I trade in a very similar way. Michael Covel's book Trend Following is my favorite book by the way. I hope a lot of people take to this type of trading because in my opinion, it is the most profitable and least stressful. I posted some of my trading results before on some threads and got slammed because people did not believe me but with this method, it is very easy to make thousands of pips each month. Just ride the trend till she bucks you. If you analyse 20-25 pairs and find the best trends, you will never have...

trading results is best kept to one-self. Negative impact isnt nice and many unfortunately dont truly understand and "see" whats possible trading.

Trend following is a very good book indeed!

Simplicity is something many dont "grasp" lol.

pip
  • #31
  • Edited 10:42am Dec 18, 2010 10:24am | Edited 10:42am
In my personal opinion Trend trading is simple and easy to learn but it is not easy to trade. See attached chart:

what would you say is the current trend?

would you say it is downtrend? it could be uptrend and the current down move could be just a retrace of a big uptrend.

it is currently in 300 pip range. how will you trade it?

there are lots of factors to consider.

I hope micardo could give examples to help us understand.

so how would i trade the attached chart? I would wait for price to break out of the 300 pip range. If i'm a range trader I would go long on 1.32 and go short on 1.35 by watching PA
Attached Image (click to enlarge)
Click to Enlarge Name: Trend.jpg Size: 62 KB
  • #32
  • Dec 18, 2010 10:38am Dec 18, 2010 10:38am
When you trade long term trends, you get used to having positions open for days, weeks, or even months. It is just part of the deal. I only use 100 pips stop losses and most trades go for anywhere between 500-1500 pips. Also, if one knows how to use parallel and inverse analysis, it gives you confidence on taking the trade. Personally, I sit down at my computer everyday at 6pm est and only spend about 10-20 minutes everyday.




Quoting stevexyg
Brenza I like the sound of that but have a few worries. What size are stop losses? Isn't it stressful having positions open for many days at a time? But probablly most of all how long does it take to analyse 25 pairs every day?!

On that topic Micardo can you give us a run-down on your start of the day routine? How long do you spend analysing the charts before taking a trade? And how exactly will you start the analysis of a pair? Do you draw trend lines on Daily then down to 5m? Is there any 'trending strength chart/indicator' you use to make sure...
  • #33
  • Dec 18, 2010 10:59am Dec 18, 2010 10:59am
Excellent thread micardo!!

Count me in.

Watch the big charts, they never lie.


golferfx
  • #34
  • Dec 18, 2010 11:10am Dec 18, 2010 11:10am
I don't want to hijack this thread but by definition, a trend is defined as something that is making new highs and higher lows in an uptrend. As soon as it it no longer doing that, it is no longer trending. Also, one can use parallel and inverse analysis to find out how strong the trend is.







Quoting vijidas
In my personal opinion Trend trading is simple and easy to learn but it is not easy to trade. See attached chart:

what would you say is the current trend?

would you say it is downtrend? it could be uptrend and the current down move could be just a retrace of a big uptrend.

it is currently in 300 pip range. how will you trade it?

there are lots of factors to consider.

I hope micardo could give examples to help us understand.

so how would i trade the attached chart? I would wait for price to break out of the 300 pip range. If i'm a range trader...
  • #35
  • Dec 18, 2010 11:58am Dec 18, 2010 11:58am
Greetings One and All,

I still have more to present about my approach but before I do I will try to answer a few questions that have arisen thus far.
  • #36
  • Dec 18, 2010 12:04pm Dec 18, 2010 12:04pm
Quoting vany
the main concern i have for trend trading is the huge stoploss and the personal expectation of the market.
To trade trends... one will require a wide stoploss so as to avoid being stopped out by whiplashes and fake breakouts... any way to counter that?

thanks in advance =)

more good years ahead..........
Hi Vany,

Unfortunately there is no way to avoid losses. It is a cost of doing business. However you size of your stop loss should not have any bearing on your risk for a trade. You just need to alter your position sizes accordingly. So 100pips can be 1% of your account as can 200 pips. By the same token 10 pips could be 20% of your account, it all depends on your position size.

The key is to be able to stay in the game long enough to ride the inevitable trends that arise. Trend trading can provide you with 1:5, 1:10 or even 1:20 risk reward, so even if you are wrong 80% or more of the time you can still come out super profitable. You just need the mental stamina to be able to endure the inevitable losses.

By the way I am not saying that you will be wrong 80% of the time, I am just saying that even if you are you can still turn a profit.

I hope that helps
  • #37
  • Dec 18, 2010 12:06pm Dec 18, 2010 12:06pm
Quoting brenzaj42
I love to see this type of thread. I trade in a very similar way. Michael Covel's book Trend Following is my favorite book by the way. I hope a lot of people take to this type of trading because in my opinion, it is the most profitable and least stressful. I posted some of my trading results before on some threads and got slammed because people did not believe me but with this method, it is very easy to make thousands of pips each month. Just ride the trend till she bucks you. If you analyse 20-25 pairs and find the best trends, you will never have...
Hi Brenzaj42,

It seems you are a seasoned pro at this too. Please feel free to add your comments whereever you feel necassary and don't worry about hijacking the thread, it is a public forum, so it is for everyone :-)
  • #38
  • Dec 18, 2010 12:16pm Dec 18, 2010 12:16pm
Quoting stevexyg
Brenza I like the sound of that but have a few worries. What size are stop losses? Isn't it stressful having positions open for many days at a time? But probablly most of all how long does it take to analyse 25 pairs every day?!

On that topic Micardo can you give us a run-down on your start of the day routine? How long do you spend analysing the charts before taking a trade? And how exactly will you start the analysis of a pair? Do you draw trend lines on Daily then down to 5m? Is there any 'trending strength chart/indicator' you use to make sure...
Hi Stevexyg,

No problem what so ever.

I would say that it is more an end of day routine with regards to the actual real analysis. I look at the candles at about 9-10pm GMT as this is also around the NY close.

In all honesty it doesn't take that long at all. Once you have your levels defined it is more a case of monitoring and quickly checking to see where your open positions are at and looking to see if there are any entries approaching. This complete process acan take you as little as 15 minutes once you get the hang of it.

So I will check my charts of an evening ready for the following days trading so I know what I will do when price does what it is going to do, that way there are no surprises and I am not making decisions during the heat of the battle so to speak. I have already defined what I am going to do, the evening before when everything is calm. My job in the day is just to execute my plan.

The rest of my day is spent reading to get an idea of what is going on fundamentally and monitoring the charts.

With regards to the tools and everything I hope that I will have defined all of that in this thread by the time i'm finished but on a very simplistic level - I draw my outer trend line in the direction of the trend, put in my fibs and horizontal support and resistance and then wait for price to retrace to my levels and act accordingly.

I don't have any trend strength indicator, I use the chart and that is all. If the price is making lower lows I am looking to short, if it is making higher highs I am looking to go long, its as simple as that.

I hope that helps, but if you have any further questions please feel free to ask.
  • #39
  • Dec 18, 2010 12:20pm Dec 18, 2010 12:20pm
Quoting vijidas
In my personal opinion Trend trading is simple and easy to learn but it is not easy to trade. See attached chart:

what would you say is the current trend?

would you say it is downtrend? it could be uptrend and the current down move could be just a retrace of a big uptrend.

it is currently in 300 pip range. how will you trade it?

there are lots of factors to consider.

I hope micardo could give examples to help us understand.

so how would i trade the attached chart? I would wait for price to break out of the 300 pip range. If i'm a range trader...
Hi Vijidas,

I know what you mean ad I think that can actually be said for trading in general.

Looking at the chart you presented I would say the it is clearly in a down trend on that time frame. The chart is making lower highs and lower lows, so I would be looking to short.

However I also agree with you in the sense that I would only take this short now once the range has been broken, as it is currently consolidating and even though we favour a short trade, if the market breaks to the upside I would be comppletely willing to take that too.

Does that answer your question?

I will provide plenty of examples as we get into it.
  • #40
  • Dec 18, 2010 12:41pm Dec 18, 2010 12:41pm
Quoting brenzaj42
I don't want to hijack this thread but by definition, a trend is defined as something that is making new highs and higher lows in an uptrend. As soon as it it no longer doing that, it is no longer trending. Also, one can use parallel and inverse analysis to find out how strong the trend is.
As you mentioned you spend only 10-20 minutes a day analysing forex pairs. How do you manage parallel and inverse analysis within that time? Do you use some kind of forex dashboard with all pairs which shows strength & weakness of each currency? doing parallel and inverse analysis can be time consuming.
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