Congratulations, trend followers

[BlackBison]

if it was as easy as that everyone would be a millionaire.

remember the famous quote 'losers average losers'

if you dont have the talent to actually pick likely reversal points then forget it. stick to trend following or whatever.

mindless averaging will lose you money in the long run. even if you win 99% of your trades the 100th will bankrupt your account.

and there always will come an event that wipes you out, that much is certain.

use talent and ability to pick reversals along with sensible fairly tight stops is the only way to go.

 

[PocketChange]

Just some ideas..

Counter Algo's need to measure movement inside your current tradeset position. Assuming you are adding to average down your counter positions in some increment.

If your increments are 4 - 12 - 24 etc. you need to track movements inside your maximum increment.

ie. how many 4 tick movements were inside the 24 tick tradeset.

As the market runs away to 24 ticks at 20 you can reverse sides or playout the trade.

If you've had 0 - 4 ticks moves in the direction of your trade and 12 against you. Reverse... and switch sides. If its < 66% against you play it out.

Still need a stop but set it on a combination of $ and tick positions to breakeven/exit. Add stop-reverse-exit as an option if you identify a strong trend.

if you trade counters you know when your quick scalp gets sucked into a long positon trade.

 

[fseitun]

Quote from BlackBison:

if it was as easy as that everyone would be a millionaire.

remember the famous quote 'losers average losers'

if you dont have the talent to actually pick likely reversal points then forget it. stick to trend following or whatever.

mindless averaging will lose you money in the long run. even if you win 99% of your trades the 100th will bankrupt your account.

and there always will come an event that wipes you out, that much is certain.

use talent and ability to pick reversals along with sensible fairly tight stops is the only way to go.

That's really good advice and all newbies who have strange ideas in mind should follow it.

Averaging down looks like a short-cut for those who have no idea where to pick a right entry. They are always wrong, hard to accept right? So the short-cut is to average down and still win the trade.

99% of the times, you get lucky.

I am stating this because I used to do the same when i started. I wasn't any good at understanding price action, so one day I got fed up with losing and decided to average down.

I got lucky for 6-8 months. I felt invincible.

One day I suffered a major drawdown and started to feel the pain, fortunately for me the market reversed and bailed me out.

I decided that would be my last time I ever did anything like that.

I started to spend 12-15hrs a day in front of the screen and tried to get better, better, and better.

Today I am a better trader and can pick good spots for my entries. When I am wrong, a tight stop will get me out.

I much rather be wrong 10 consecutive times and still be in business than be almost always right and that one time I am wrong, I AM GONE.

That parabolic move was a major V-Shaped counterthrust, that signaled a temporary bottom.

When you see resistance levels being sliced thru like a hot knife thru butter, then you know it's a big move and not a retracement.

By the way, there are circumstances where I add to a loser as long as price action stays within my support-resistance zone and price is getting close to my stop loss. Sometimes I catch a free ride, when wrong I lose slightly more.

By the way, i don't countertrend trade. I let others do the dirty job to pick bottoms and tops.

 

[IronFist]

Quote from fseitun:

Averaging down looks like a short-cut for those who have no idea where to pick a right entry. They are always wrong, hard to accept right? So the short-cut is to average down and still win the trade.

99% of the times, you get lucky.

I'm within 4 ticks of the top (bottom) about 60% of the time, and within 8 ticks of the top (bottom) about 90% of the time.

I am stating this because I used to do the same when i started. I wasn't any good at understanding price action, so one day I got fed up with losing and decided to average down.

I got lucky for 6-8 months. I felt invincible.

Yeah that was me for the last few months (on my demo account).

Today I am a better trader and can pick good spots for my entries. When I am wrong, a tight stop will get me out.

Are you one of those no indicator people?

I much rather be wrong 10 consecutive times and still be in business than be almost always right and that one time I am wrong, I AM GONE.

It's always that one big trade no matter how you trade.

If you're a trend follower, you have a billion small losses and then hopefully one huge win that more than makes up for them.

If you're counter trend, you have a million small wins and possible one huge loss that more than makes up for your wins.

When you see resistance levels being sliced thru like a hot knife thru butter, then you know it's a big move and not a retracement.

When you say "resistance levels," do you mean once that the trader calculates on the fly (ie. previous swing higs and lows?) or so you mean like Pivot Point resistance levels that are pre-calculated before the market opens?

Thanks.

 

[bwolinsky]

Quote from IronFist:

Can one of you good traders tell me what I missed? I didn't see any big news announcements scheduled for this afternoon or anything.

That was the longest trend I've ever seen ever.

What'd you miss? Funny, how about one of the biggest bailouts for financial institutions since the 80's S&L crisis. You need to watch CNBC and bloomberg more often, and certainly all day, or you would have realized the stupidity.

 

[fseitun]

1) Are you one of those no indicator people?

Yes, I am one of them. Price says it all.



2) It's always that one big trade no matter how you trade.

Not really. I would never have that big one trade against me simply because I use small stops.

3) If you're a trend follower, you have a billion small losses and then hopefully one huge win that more than makes up for them.

Who told you trend followers have billion small losses? I don't depend on one big win, I very consistent at taking profits and that big one win can just make my day better.

4) If you're counter trend, you have a million small wins and possible one huge loss that more than makes up for your wins.

Agree. Sometimes it can wipe out your account and you say goodbye to trading.


5) When you say "resistance levels," do you mean once that the trader calculates on the fly (ie. previous swing higs and lows?) or so you mean like Pivot Point resistance levels that are pre-calculated before the market opens?

All my support-resistance levels are marked on my charts, like pivot points if that's the way you like to call them.

That's my homework as a daytrader: keep my charts updated, erasing some supports, adding some resistances, and viceversa.

It took me quite a while to figure out how to identify good support-resistance levels, and they are not just the classic swing pts.

Swing pts are levels I look at, but they don't represent S/R entirely for me.

I don't use Fibonacci either.

Just S/R resistance. Once a resistance is gone, we move to the next.

Of course, I am not 100% right all the time. Nobody is perfect.

Sometimes the market will bounce hard and I may have no support and I am like: "I didn't see this coming"

It's ok, I learned to accept it. Actually, I am happy because I have a new level to play with.

 

[ProfitTakgFool]

Overall, this is very good advice and carries a lot of weight but averaging into a trade is not necessarily a losing strategy, even in the long run, provided the trader can differentiate between noise and true strength or weakness, and, you have to have the discipline to exit when you know you are wrong. The good news is once you blow up, even if it's just a paper trading account, you'll never forget it. I didn't trade this method with real money until I blew up a paper account. After that I knew I was ready. Trading is an art and averaging into a trade is no different than buying an MACD cross.

Quote from BlackBison:

if it was as easy as that everyone would be a millionaire.

remember the famous quote 'losers average losers'

if you dont have the talent to actually pick likely reversal points then forget it. stick to trend following or whatever.

mindless averaging will lose you money in the long run. even if you win 99% of your trades the 100th will bankrupt your account.

and there always will come an event that wipes you out, that much is certain.

use talent and ability to pick reversals along with sensible fairly tight stops is the only way to go.

 

[fseitun]

Quote from ProfitTakgFool:

Overall, this is very good advice and carries a lot of weight but averaging into a trade is not necessarily a losing strategy, even in the long run, provided the trader can differentiate between noise and true strength or weakness, and, you have to have the discipline to exit when you know you are wrong. The good news is once you blow up, even if it's just a paper trading account, you'll never forget it. I didn't trade this method with real money until I blew up a paper account. After that I knew I was ready. Trading is an art and averaging into a trade is no different than buying an MACD cross.

Well, here is an example:

You get long. Stoploss is 20 ticks from your entry.

Market moves 10 ticks against you. If you add here, I wouldn't even consider it averaging down. It's just an add at a better price. As long as you stay within your risk parameters, you are ok with.

However, if price moves past your stop and you don't get out and keep adding, that's averaging down and that's when it gets real dangerous.

 

[IronFist]

Quote from fseitun:

Who told you trend followers have billion small losses? I don't depend on one big win, I very consistent at taking profits and that big one win can just make my day better.

People on this forum.

But more importantly, I back tested a bunch of trend following strategies (based on the slopes of MAs, not crossovers), and only one of them was ever profitable during the time period I tested and the one way it was profitable was when I absolutely let every trade run until the MA changed slope.

Taking profits on winners at 3, 5, 8, 10, and 12 ticks lead to overall unprofitability because the rare 50+ tick winner was eliminated. The reason I tested taking profits here was because sometimes there were trades that would go 5 or 10 ticks in your favor, then reverse, and then have the MA slope reverse (exit signal) for a loss. I thought taking profits early would be a good way to turn these trades into winners. Doing so increased my number of winners, but changed overall profitability into unprofitability.

Also worthy of mention is that it was important that the ONLY time in which you cut losers was after the MA slope changed. Sometimes a trade would trigger, immediately go against you 10 or 20 ticks, but the slope of the MA wouldn't change and you HAD to NOT exit your position. Rarely it would continue in your position and become a large winner (50+ ticks) and thus be necessary for overall profitability.


As a result of that, which I spent months testing, changing, and testing again, I came to the conclusion that in order for a trend following system to be profitable, the only exit criteria is when the slope of the MA changes. Taking profit early, and cutting losses before the MA slope changes will result in losing money over time.

I also came to the conclusion that there will be many losses and occasional massive wins that, if you're lucky, will make up for all the loses and then some.

All testing was done only on the YM.

Your mileage may vary.



edit - one thing I didn't try was trading multiple lots (2) and taking profits on 1 at a preset point and letting the other ride until the slope changes. However, given what I know about math, I suspect this would result in a loss of money over time, because the losers (and some of them were huge) would be with 2 contracts, thus out-weighing the long running winners (which would be with only 1 contract).