Help with trend following techniques

More excellent advice,

Now, back to price chasing. Today was another great (because its on paper) but sad (because of the losses) day.

I went long near the open following the trend continuation from yesterday and banked a huge profit near noon.

Then, from 1pm onwards, I kept going short on trend line breaks, only to see price jump right up, followed by a long which didnt last long since price then began to retreat once more, breaking the trend line again, rince and repeat, you get the picture. I lost all the mornings profit and then some.

This is what I mean by price chasing, which I find myself doing a lot

Clearly today the trend was up, but if a trend line is broken, how do you know whether this is a pullback opportunity to go long (and then redraw the trend line) or the faboulous commencement of a new short trend?

Failing to spot this difference is one I believe my main limitation which is leading to those price chasing binges that can add up although the resulting losses are small

Thanks
J
 
Quote from jr07:

I went long near the open following the trend continuation from yesterday and banked a huge profit near noon.
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Nice thing about trading: If you book a nice profit by noon, you can take the rest of the day off!

Quote from jr07:

Clearly today the trend was up, but if a trend line is broken, how do you know whether this is a pullback opportunity to go long (and then redraw the trend line) or the faboulous commencement of a new short trend?

Failing to spot this difference is one I believe my main limitation which is leading to those price chasing binges that can add up although the resulting losses are small

Thanks
J
More...

I'm assuming you're trading SSO again. The initial trend line leading into 11:30 a.m. is really steep, so although it appears to be "broken" around that time (when the first lower high occurs), the retracement of the move up is never more than 8% of the entire move from the open to the first lower high. So there's no reason to go short. Take your profits at noon and call it day, or put in a trailing stop and call it a day, or watch the rangy action until the double top late in the day (3:15 p.m.) followed by a lower high that tells you to take your profits and call it a day.

Really no signal to go short until the lower high after the double top, because there was never enough retracement to invalidate the trend, and even a short position there didn't provide a very large move before the close.
 
It seems to me that the middle of the day, typically a slow and listless trading time, is not a great time to trade these breakouts. I'm guessing if you make a habit of trading trendline breaks in the middle of the day, unless it happens to be a moderate or strongly trending day, you are going to get butchered.

I always tended to be the guy taking the opposite side of your trades (and getting butchered on those trending days).

Generally (trend-following day traders feel free to correct me) I would say you might be better off taking a shot or two early to mid-morning, then laying off until later in the trading day, and then maybe taking another shot if an opportunity presents itself as volume picks up late in the day.
 
Quote from jr07:

Now, back to price chasing . . . Then, from 1pm onwards, I kept going short on trend line breaks, only to see price jump right up
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There are many methods to picking when to go short if you choose to countertrend trade.

A trendline break is fairly agressive (earlier=agressive). If you get burned, then deciding whether to try a second time should already be determined by your trading plan. You can't keep repeatedly trying something based on hope. You have to be more structured than that.

Want to play a reversal or countertrend? then consider 1-2-3 moves, or a LH followed by a LL, or two broken trendlines, or a bar break, etc. Pick your method based on your agressiveness/risk profile.

But just like before, if you are starting out, keep it simple. Trade in the direction of the prevailing trend. Unless you set out to be a countertrend trader, you had no reason to consider shorts yesterday. You would have found plenty of long entries. Playing the short side on those days is poor judgement at the very least and a surefire way to overtrade at the worst.

If you are serious about this, get a trading plan together and know what you will do before you have to do it. If you can't make the effort to do this, then you are wasting everybody's time who is trying to help you. No joke. If this is a hobby for you, then carry on. If you intend to be something more, then get a professional mindset. Until you do this, you are wasting valuable time and will screw up your mindset altogether.

Keep trading.

JS
 
Quote from jr07:

Hi all

I have been trying to trade using the classic Higher Low + Higher High followed by retracement and price strength for long trades and Lower High + Lower Low followed by retracement and price weakness for short trades.

One of the premises of this simple system is not to use any indicators at all, just follow price.

However, my success has been very poor, to the point where Im even having crazy ideas like doing the exact opposite of what the system tells me? (or at least the opposite of what I see!)

Most days I end up chasing price.

I attach a picture of today for instance. There you can see 4 trades (two longs, two shorts), where I drew trend lines and waited for a pullback followed by price strength or weakness. All trades where losing trades, since as you can see in the picture, when I go long the price goes down and when I go short price goes up!

Thank you all
J
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BE CAREFUL . It's already virtually impossible to year-on-year make money trading intraday (I've posted about that).

and don' t trade like this. you will lose money because:

I. this method (and similar methods) work only ON A STRONG DAY, with the RIGHT STOCK on STRONG VOLUME

that' s the only constellation where you will have 60 winners out of 100 with your setup.

since you can' t get a strong da, with strong stocks and strong volume each day, people become fidgety and start trading WEAK STUFF on medium days..which is where statistics turn against you



I
 
Kicking


Registered: Jun 2001
Posts: 2756


07-24-09 10:20 AM

this is simply a flawed strategy

..........................................................END.............................

Bingo!!!!

Double Bingo!!!

Trading countertrend is probably the #1 rookie mistake in the game. Only if and when they learn how to follow a trend and milk it for all it is worth will they make money instead of just "TRADING" money until they run out of money to pay the commissions.

The word "COUNTERTREND itself is a dead give away about the persons knowledge of trend following. There is no logical explanation to say you are trading "COUNTERTREND" except admitting you are just guessing the trend has reversed. A trend is either going up or down in price or just consolidating in preparation for the next price move.

Ok, maybe trading countertrend means are you chicken to follow the trend more because you consider price to high or to low,,,,,,,,,,,, see, you are guessing. :D

PS: A trend is either up or down and it will not be reversed until a reversal signal proves it has reversed.
 
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