Following the Trend vs. Looking For a Reversal

M

Money Trust

I've spoken to several other successful traders and they've admitted to having gone through this phase. That being said, I think it's a pretty interesting topic of discussion. Have you gone through the phase of playing for reversals instead of following the trend?

I've got to admit that I had a really bad habit of always looking to play the reversal instead of going with the immediate trend. That habit cost me a lot in potential profits. I remember it being said that the majority of reversal attempts fail and that the markets have a tendency to continue to do what they've been doing, which from my experience is true. I remember always thinking that if I get in on this trend now it just may reverse until I did it once and made my biggest profit ever. Maybe because I'm a swing trader and it's tempting to play for every swing instead of swinging in the direction of the trend...but following the trend that one time convinced me to trade that way at all times, be it intraday or multi-day.

I'd like to hear you all's take and how you overcame it.
 
Money Trust said:
I've got to admit that I had a really bad habit of always looking to play the reversal instead of going with the immediate trend. That habit cost me a lot in potential profits. I remember it being said that the majority of reversal attempts fail and that the markets have a tendency to continue to do what they've been doing,
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As per your reasoning you should be LONG like the fellas in the thread below and they really should not be ridiculed for yelling, BUY, BUY FREEEEEEE money because the First Law of Trends = Trend tends to continue

http://www.elitetrader.com/et/index.php?threads/gotta-love-zero-risk-in-the-sp500.85694/unread
 
Money Trust said:
I've spoken to several other successful traders and they've admitted to having gone through this phase. That being said, I think it's a pretty interesting topic of discussion. Have you gone through the phase of playing for reversals instead of following the trend? ...

I'd like to hear you all's take and how you overcame it.
More...

I found early on stocks go up longer than come down, when I first started, was way too expensive to even consider shorting. Even today, if 40sma on weeklies sloping up, only buy and when I think reversal is due, just get out and do Call Credit Spreads but chart patterns have to be very good. I tried for years to trade with trend in commodities and all I did was lose, thought Hey, big brokerage houses seldom get wiped out, they go against the crowd, so I figured trend is not always your friend. In day trading, all my entries are against some kind of timeframe.

Ever trade has some risk, hedge yourself for reversals.

Are you bored and you looking to sell high and buy low?
 
I started with reversals > trend following > and settled on reversal trading. Reversal trading qualifies as trend-following when reversals are spotted during pullbacks in established trends... :P It's all semantics, I guess.
 
Money Trust said:
I've spoken to several other successful traders and they've admitted to having gone through this phase. That being said, I think it's a pretty interesting topic of discussion. Have you gone through the phase of playing for reversals instead of following the trend?

I've got to admit that I had a really bad habit of always looking to play the reversal instead of going with the immediate trend. That habit cost me a lot in potential profits. I remember it being said that the majority of reversal attempts fail and that the markets have a tendency to continue to do what they've been doing, which from my experience is true. I remember always thinking that if I get in on this trend now it just may reverse until I did it once and made my biggest profit ever. Maybe because I'm a swing trader and it's tempting to play for every swing instead of swinging in the direction of the trend...but following the trend that one time convinced me to trade that way at all times, be it intraday or multi-day.

I'd like to hear you all's take and how you overcame it.
More...




My response will likely come off crass – c'est la vie


===========================


Random thoughts;

What resolution(s)/ solution(s) have these “several other successful traders” offered up

And why are you not listening to them / heeding their advice


“looking to play the reversal instead of going with the immediate trend”

Don’t you mean the “potential” reversal


“that habit cost me a lot in potential profit”

Don’t you mean realized losses


More random thoughts;


Stop trying to tick fuck every move

Stop trading your opinion – for that matter stop thinking your opinion matters

Stop being reluctant to miss a move

Start waiting for confirmation (there’s an adage I’ll paraphrase) – 2nd mouse get the cheese – 1st mouse gets killed – more times than not


All trends (I hate the term trend btw) develop and terminate over a series of moves.., that are corroborating…, countering…, and ambivalent

May want to familiarize yourself with those components…, and their characteristics…, as exhibited within the instrument you trade



“I remember always thinking”

Both are problematic for a trader


"I'm a swing trader and it's tempting to play for every swing instead of swinging in the direction of the trend...but following the trend that one time convinced me to trade that way at all times, be it intraday or multi-day."


Decide whether you’re a swing trader or a day trader – blending only results is the worst of both worlds


“I did it once and made my biggest profit ever”

Several issues surrounding this sentence – none of which are conducive to profitable trading



A little food for thought


RN
 
AfterLos wouldn't dream of attacking the people who are kind enough to criticize and critique my folly and\or stupidity: :) but some sobering facts are revisited


FACT:


The October 2007 Top pre-CRASH of 2008:
Not a single ET-er saw it coming - use search engine, eeeeeezy to see - in fact there is an entire thread that went something like, "jump in free money, easy money, don't be a fool pile in" - and dig this, ET-er were buying the dips well into May 2008 - and then dig this, they vanished for a year to heal their wounds and returned as if nothing had happened.

AfterLOS has read the pages - why? SENTIMENT analysis.



http://www.elitetrader.com/et/index...s-of-july-25-2014.285762/page-10#post-4013880
 
FACT:

The October 2007 pre-crash TOP:
Behold the gurus of the financial world:

see below extract from post #6 of this thread :)
Morgan Stanley's other famous Hi-So gurus and fiends, Ben Bernanke & Henry Paulson from the October 2007 pre-CRASH top and their legendary anal-ysis:

June 20th, 2007 – Bernanke: The mortgage debacle “will not affect the economy overall.''
July 12th, 2007 – Paulson: "This is far and away the strongest global economy I've seen in my business lifetime."
August 1st, 2007 – Paulson: "I see the underlying economy as being very healthy,"
October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."
May 7, 2008 – Paulson: 'The worst is likely to be behind us . . . . ”
May 16th, 2008 – Paulson: "In my judgment, we are closer to the end of the market turmoil than the beginning."
July 16th, 2008 – Bernanke: On Freddie and Fannie: “They will make it through the storm”, "… in no danger of failing.","…adequately capitalized"
Only two months later both were nationalized.
February 14th, 2008 – Paulson: (the economy) "is fundamentally strong, diverse and resilient."




http://www.elitetrader.com/et/index...s-of-july-25-2014.285762/page-10#post-4013881
 
Conclusion based on examination of the facts: AS far as seeing anything coming, ET-ers couldn't takeout a burger out of a takeout stand.

But Your Honor, they claim to not care about direction so knowing about impending reversals on the larger timeframes is not necessary as they only trade on nanosecond charts and even that might be considered long-term.

But here's the fallacy:

Nanosecond, 1-min or whatever charts have reversals too of the same type as their larger brethren which is clear since we are dealing with fractals.


I can forgive a man anything, but a man who does not even get his FACTS right ..............

Buffett ran into criticism[43] during the subprime crisis of 2007–2008, part of the recession that started in 2007, that he had allocated capital too early resulting in suboptimal deals. "Buy American. I am." he wrote for an opinion piece published in the New York Times in 2008.[44] Buffett called the downturn in the financial sector that started in 2007 "poetic justice".[45] Buffett's Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his later deals suffered large mark-to-market losses.[46]

according to Forbes, Buffett lost $25 billion over a 12-month period during 2008/2009



http://www.elitetrader.com/et/index...s-of-july-25-2014.285762/page-10#post-4013884
 
At the very bottom of the BEAR in March 2009

In March 2009, Buffett said in a cable television interview that the economy had "fallen off a cliff ... Not only has the economy slowed down a lot, but people have really changed their habits like I haven't seen". Additionally, Buffett feared that inflation levels that occurred in the 1970s—which led to a painful stagflation that lasted many years—might re-emerge


http://www.elitetrader.com/et/index...s-of-july-25-2014.285762/page-10#post-4013885
 
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