Archives of “trend followers” tag

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Nuggets

  
  Education
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Price — The Truth, The Light, The Way

  • Work to understand price
  • Price does not move in a straight line
  • Big moves take time
  • Volatility is your friend and helps to compress time
  • Although volatility is your pal, it can cut both ways
  • If a stock moves 30% a day, then you can’t trade with a 5% stop
  • Don’t expect a volatile stock to stop behaving as it has been and only move in your favor just because you’re now in it. Unless you’re Bill Clinton, what is, IS.

Random Thoughts:

  • Observe but be slow to shift gears — we are trend followers, not predictors
  • It’s the market’s “job” to shake you out
    • The market will do what it has to do to create the most pain (for the most people)
    • The market will often do the obvious in the most un-obvious manner
  • Err on the side of the longer-term trend
    • DO wait for entries
    • DO use protective stops
    • DO trail and scale as offered

Qutotes from Richard Dennis & Paul Tudor Jones

  
  Education
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Richard Dennis

“when you start, you ought to be as bad a trader as you are ever going to be.”

“I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.”

“my research on individual stocks shows that price fluctuations are closer to random than they are in commodities. Demonstrably, commodities are trending and, arguably, stocks are random.”

“There will come a day when easily discovered and lightly conceived trend-following systems no longer work. It is going to be harder to develop good systems.”

“The secret is being as short term or as long term as you can stand, depending on your trading style. It is the imtermediate term that picks up the vast majority of trend followers. The best strategy is to avoid the middle like the plague.”

Paul Tudor Jones

“First if all, never play macho man in the market. Second, never overtrade. My major problem was not the number of points I lost on the trade, but that I was trading far too many contracts relative to the equity in the accounts that I handled.” (more…)

Nuggets

  
  Education
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Price — The Truth, The Light, The Way

  • Work to understand price
  • Price does not move in a straight line
  • Big moves take time
  • Volatility is your friend and helps to compress time
  • Although volatility is your pal, it can cut both ways
  • If a stock moves 30% a day, then you can’t trade with a 5% stop
  • Don’t expect a volatile stock to stop behaving as it has been and only move in your favor just because you’re now in it. Unless you’re Bill Clinton, what is, IS.

Random Thoughts:

  • Observe but be slow to shift gears — we are trend followers, not predictors
  • It’s the market’s “job” to shake you out
    • The market will do what it has to do to create the most pain (for the most people)
    • The market will often do the obvious in the most un-obvious manner
  • Err on the side of the longer-term trend
    • DO wait for entries
    • DO use protective stops
    • DO trail and scale as offered

Trading Nuggets

  
  Education
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Price — The Truth, The Light, The Way

  • Work to understand price
  • Price does not move in a straight line
  • Big moves take time
  • Volatility is your friend and helps to compress time
  • Although volatility is your pal, it can cut both ways
  • If a stock moves 30% a day, then you can’t trade with a 5% stop
  • Don’t expect a volatile stock to stop behaving as it has been and only move in your favor just because you’re now in it. Unless you’re Bill Clinton, what is, IS.

Random Thoughts:

  • Observe but be slow to shift gears — we are trend followers, not predictors
  • It’s the market’s “job” to shake you outErr on the side of the longer-term trend
    • The market will do what it has to do to create the most pain (for the most people)
    • The market will often do the obvious in the most un-obvious manner
  • DO wait for entries
  • DO use protective stops
  • DO trail and scale as offered

10 Trend Commandments

  
  Education
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  1. You shall learn from successful trend followers to make big returns in the market.

  2. You shall follow the trend only, and have no guru that you bow down to.
  3. You shall not try to predict the future in vain, but follow the current price trend.
  4. You shall remember the stop loss to keep your capital safe, you shall know your exit before your entry is taken.
  5. Follow your trend following system all the days that you are trading, so that through discipline you will be successful.
  6. You shall not give up on trading because of a draw down.
  7. You shall not change a winning system because it has had a few losing trades.
  8. You shall trade with the principles that have proven to work for successful traders.
  9. You shall keep faith in your trend following even in range bound markets, a trend will begin anew eventually.
  10. You shall not covet fundamentalists valuations, Blue Channels talking heads, newsletter predictions, holy grails, or the false claims of black box systems.

If you want news and entertainment watch BLUE CHANNELS, if you want to learn how to trade & Mint Money then Read www.AnirudhSethiReport.com 

10 Things I’ve Learned About Markets

  
Analysis, Education
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1. “There is no such thing as easy money”

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

3. Markets that have little liquidity are almost impossible to profit from.

4. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

5. The market puts infinitely more emphasis on ephemeral announcements that it should.

6. It is good to go against the trend followers after they have become committed.

7. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you’ll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

8. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

9. A meme about the relation between today’s events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

10. All higher forms of math and statistics are useless in uncovering regularities.

How to Trade Through the Pain

  
  Education
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10 painful aspects of trading and what to do about them.

  1. The pain of losing money. (Trade smaller so it is not as painful, it is just an outcome not an emotion).

  2. The pain of being wrong about a trade you were sure about. (You lost simply because the market didn’t match your trade, trend followers lose money in choppy markets, swing traders lose money in trending markets, it’s the market not you. As long as you followed your own plan.)
  3. The pain of a draw down in capital.
  4. Consecutive trading losses hurt. They make you doubt yourself, your method, and your system. (You need to remember your winning trades, your winning years, or your back-testing, or paper trading of the method. You have to keep the faith or get with a method you have faith in).
  5. The embarrassment of public losses. You told everyone who would listen about a great trade you were taking and you were wrong. Social media has given us all the ability to embarrass ourselves anytime we want. (Never be overconfident in any trade, but always be sure of your stop loss.)
  6. The pain of of admitting you were wrong. (Cut your loss and move on to the next trade, trade reality not your ego.)
  7. Losing paper profits, you are up 20% on a trade then a massive whip saw takes back those profits in one move. (Take your trailing stop and move on to the next trade, there is truly no reason to cry over spilled milk.)
  8. You are following a guru and come to realize he truly is a salesman not a trader. (You stop following gurus and look to learn how to trade for yourself using a method and a trading plan).
  9. You buy a super hot stock that you have researched for many weeks then it goes down due to a bear market. (Only trade stocks long in up-trending markets)

  10. You start trading a system that did amazing in back-testing and promptly lose 10% of your account. (You have to stick with it so it can win in the long term, you may need to make slight adjustments in position sizing or stops to account for volatility that you may have missed.)

Using Hope & Fear Correctly in Trading

  
  Education
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In trading most new traders allow hope and fear to dictate their trading. They have a losing trade and instead of selling it and getting out they instead hope it will come back to even allowing the loss to grow. Another error  for new traders is that when they have a winning trade they fear that the profit will disappear so they sell for a small gain and miss the big trend in their favor. When hope and fear controls the trader they end up with big losses and small gains. A formula for ruin.

Instead the rich trader is fearful of losses getting bigger so they sell quickly when losing, risking a maximum of 1% of their capital on any one trade. Rich traders are able to think clearly and trade rationally knowing exactly what they are risking, when their stop is hit, they get out. This enables them to keep all their losses small.

When a trade is immediately a winner for a rich trader they hope it will run 100 points in their favor. Rich traders enable this to be possible with a trailing stop, they do not get out of a winning trade until a key price reversal has happened that tells them that the trend is actually reversing.

Rich traders are fearful of losses growing bigger and hope that their winners will continue on a monster trend. This mindset allows  them to be on the right side of trends and avoid any huge losses. This is why the best traders in the world are trend followers and win consistently. Do you want to join their club? Then do not let fear and hope dictate your trading decisions use them correctly.

11 Things I’ve Learned About Markets

  
  Education
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1. “There is no such thing as easy money”

2. Events that you think are affected by cardinal announcements like the employment numbers at 8:30 am on Friday are often known to many participants before the announcement

3. It’s bad to try to make money the same way several days in a row

4. Markets that have little liquidity are almost impossible to profit from.

5. When the stock market is way down, policy makers take notice and do what they can to remedy the situation.

6. The market puts infinitely more emphasis on ephemeral announcements that it should.

7. It is good to go against the trend followers after they have become committed.

8. The one constant, is that the less you pay in commissions, and bid asked spread, the more money you’ll end up with at end of day. Too often, a trader makes a fortune on the prices showing when he makes a trade, and ends up losing everything in the rake and grind above.

9. It is good to take out the canes and hobble down to wall street at the close of days when there is a panic.

10. A meme about the relation between today’s events and those of x years ago is totally random but it is best not to stand in the way of it until it is realized by the majorit of susceptibles

11. All higher forms of math and statistics are useless in uncovering regularities.

Quotes from The Little Book of Trading

  
  Education
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The Little book of trading is a must read for trend followers. Michael Covel brings down to all of us what is needed in order to succeed in trend following:

Some of the quotes need to be internalized by investors of trend following strategies..

David Druz

Trend traders are trying to capture risk premium from the hedgers. […]
Hedgers hope to minimize their exposure to unwanted risk. Speculators (i.e. trend followers assume risk for hedgers. […]
Hedgers are net losers in futures markets over the long run, and Druz’s trend trading approach is based on capturing this risk premium.

The more robust a system, the more volatile it tends to be!
There are whole families of trend trading ideas that seem to work forever on any market. The down side is they are very volatile because they are not curve-fitted.

Larry Hite

Hite has two basic rules about trading and life:
1) If you don’t bet, you can’t win.
2) If you lose all your chips, you can’t bet

Justin Vandergrift

While entry and exit is an overwhelming focus for new traders, it is only a small part of the recipe for winning in the trend follower’s cookbook. Money management is far more imperative to your success than worrying about a perfect entry.

Vandergrift, like many of the trend following traders, found through intense research that the only systems that really worked over time were long term trend following in nature. However, his real Aha! moment came when he put money managementinto his trading system equation. […] If you have a portfolio of markets, […] you want t risk an equal amount on every trade.

Michael Clarke

You want to look for trend following models that remain robust over long time periods and you want to include models that have flat to negative performance for periods of up to two years. The principles that allow a good model to work successfully may fall out of favour and stop working for a period of time, but if the model has validity, the long-term principles will reassert themselves over time. Don’t jump the gun in throwing away your models.

In order for a model to be accepted, you want it to trade all markets using the same rules and parameters. Your results should yield good performance across 90-plus percent of all markets tested. Also, no model should be accepted unless it shows stability of performance during tests involved with shifting parameters and altering rules. This is the definition of robust.

David Harding

Don’t get caught up constantly trying to lower your risks. Think of yourself as running a risk targeting business where you go find risk. No risk, no reward!

I think the efficient market hypothesis is quite useful too. One prediction it makes is that it is difficult to beat the markets. It’s just saying that the markets know better than you do. So the assumption that the markets know better than you do is quite a sensible and useful assumption. It certainly would lead you to approach [beating the markets] with humility and modesty.

Determination is the same as having wings. If at first you don’t succeed, try, try, and try again. Madonna always says, ‘I’m like a cockroach.’

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