If trend following, can money management save you in chop?

[intradaybill]

Quote from oilfxpro:

A trend is a trend whether on tick charts or 1 minute charts , or trend is what you want to believe is a trend.

With the same reasoning, a chair is a chair regardless of its size and whether you can actually sit on it as long as there is a plate on 4 legs, even if 1" square.

You know, a lot of idiots who never traded got involved with this business and started seeing trends in intraday data because they thought that was a revolutionary thing to do. They called it fractal trading in the beginning.

 

[FrankSlaughtery]

i disagree that you should 1) not trade during certain times of the day b/c you (in general) think the market might not trend then b/c no one knows when the market will trend period the end. you have to be ready to ride the trend whenever it happens.

also i disagree that you should add a rtm (reversion to mean) oscillator like stoch/rsi/etc. a trend following strategy will lose money in chop - you can't and shouldn't try to optimize a good strategy w/ positive expectancy to avoid all loses - that usually leads to more losses than you started w/ b/c now for example say the market breaks out but the rsi is above 70 you're saying "i have to exit long or short b/c my rtm indicator is high". bottom line it's not advised to use two indicators that contradict each other b/c how will you know when to use which one (you won't).

 

[oilfxpro]

Quote from FrankSlaughtery:

i disagree that you should 1) not trade during certain times of the day b/c you (in general) think the market might not trend then b/c no one knows when the market will trend period the end. you have to be ready to ride the trend whenever it happens.

also i disagree that you should add a rtm (reversion to mean) oscillator like stoch/rsi/etc. a trend following strategy will lose money in chop - you can't and shouldn't try to optimize a good strategy w/ positive expectancy to avoid all loses - that usually leads to more losses than you started w/ b/c now for example say the market breaks out but the rsi is above 70 you're saying "i have to exit long or short b/c my rtm indicator is high". bottom line it's not advised to use two indicators that contradict each other b/c how will you know when to use which one (you won't).

Trend is very subjective , 95 % of trends on tick chart fail on larger time frames , 80 % of trends on 1/5/15 min fail .Trend trading is addictive gambling.

 

[RCG Trader]

Quote from oilfxpro:

Trend is very subjective , 95 % of trends on tick chart fail on larger time frames , 80 % of trends on 1/5/15 min fail .Trend trading is addictive gambling.

No.

Anything OTHER than trend following is addictive gambling. Trying to trade every squiggle and wiggle in the market is just plain silly. There is always a prevailing sentiment in any market, the strength of that sentiment is measure by the slope of the curve that price is riding during the time frame in question.

Trading against the slope of that curve makes no real sense.

 

[Hook N. Sinker]

Quote from swag:

Howdy folks,

is there a way for money management to save you from losing as much in chop if you are trend following? For example, sizing up/down (or is that just martingale-esque?). This is assuming your signals can't determine any difference between trending/chop. It would be nice if anyone could share ideas, thanks.

I remember comparing scaling and non scaling methods:

http://www.elitetrader.com/vb/showthread.php?s=&postid=2237697

I trade single entry, single exit.

 

[murray t turtle]

Quote from swag:

Howdy folks,

is there a way for money management to save you from losing as much in chop if you are trend following? For example, sizing ...down . It would be nice if anyone could share ideas, thanks.

=============
Swa;
yes & yes, perhaps over a medium or longer time period.

Lots of money has been made with deep drawdowns/not sizing down. But as a concrete example, BAC & C are still in fine downtrends;
but noting both have spent more time above 50 day moving average , in OCT, i wouldnt want to assume the downtrends probabilities for late NOV/ DEC are the same...

And how old is the trend;
how old is the chop, that may help. Drawdowns happen.

 

[oilfxpro]

Quote from murray t turtle:

=============
Swa;
yes & yes, perhaps over a medium or longer time period.

Lots of money has been made with deep drawdowns/not sizing down. But as a concrete example, BAC & C are still in fine downtrends;
but noting both have spent more time above 50 day moving average , in OCT, i wouldnt want to assume the downtrends probabilities for late NOV/ DEC are the same...

And how old is the trend;
how old is the chop, that may help. Drawdowns happen.

Somebody brainwashed others with this ol crap charged them $$$ for great advice about trend trading , so 95% of them blew their accounts trading failing trends

 

[deaddog]

Quote from oilfxpro:

Somebody brainwashed others with this ol crap charged them $$$ for great advice about trend trading , so 95% of them blew their accounts trading failing trends

If they blew their account there was no money management strategy in place. Except of course martinagale.

 

[Rabbitone]

Quote from swag:

Howdy folks,

is there a way for money management to save you from losing as much in chop if you are trend following? For example, sizing up/down (or is that just martingale-esque?). This is assuming your signals can't determine any difference between trending/chop. It would be nice if anyone could share ideas, thanks.

As Intradaybill noted Trend following is a term that has been around for decades as defined by:

http://en.wikipedia.org/wiki/Trend_following

So I assume you mean longer term trends. I have position traded and swing traded for years in longer term trends. To keep my head straight I often refer back to these quotes I saved:

Jake Bernstein stated: "It took me over nine years to realize that, although it may be a romantic and ego-satisfying goal, forecasting is not necessarily synonymous with profit. To anticipate trends is a difficult and often haphazard task, and it tends to lead to losses more often than profits."

With this quote I learned you have to start somewhere to trade trends and you have to be prepared to take big drawdowns before you ever get to the meat of a trend where the profits are. For example my methods had a big drawdown in early 2008 until I adjusted. Then the trend profits from 2009 and 2010 made up for the losses big time and are sustaining me through the choppy period we are currently in. You have to learn to trade through the choppy periods to get back to the trends.

Russell Sands was an original member of Richard Dennis' Turtles group and has built a successful career as a money manager and advisor generally using the Turtle methodology. He stated:

"The best approach is to be a long-term trend follower. Trend following is statistically valid in the sense that everybody has tested it for years and years, and it works. "I acknowledge that the market trends maybe 20 percent of the time and chops back and forth in consolidation 80 percent of the time. The trick is how to define where the trend starts and where it stops. If when a market does trend, you get in at the right time, ride that trend and then get out at the right time, you'll make enough money to more than offset the losses you take during non-trending periods.

This quote sums it up what you have to get through to trend trade. You have to prepare your money management to get you through the chop periods so the trend periods can make you money.

 

[RCG Trader]

Quote from Rabbitone:

As Intradaybill noted Trend following is a term that has been around for decades as defined by:

http://en.wikipedia.org/wiki/Trend_following

So I assume you mean longer term trends. I have position traded and swing traded for years in longer term trends. To keep my head straight I often refer back to these quotes I saved:

Jake Bernstein stated: "It took me over nine years to realize that, although it may be a romantic and ego-satisfying goal, forecasting is not necessarily synonymous with profit. To anticipate trends is a difficult and often haphazard task, and it tends to lead to losses more often than profits."

With this quote I learned you have to start somewhere to trade trends and you have to be prepared to take big drawdowns before you ever get to the meat of a trend where the profits are. For example my methods had a big drawdown in early 2008 until I adjusted. Then the trend profits from 2009 and 2010 made up for the losses big time and are sustaining me through the choppy period we are currently in. You have to learn to trade through the choppy periods to get back to the trends.

Russell Sands was an original member of Richard Dennis' Turtles group and has built a successful career as a money manager and advisor generally using the Turtle methodology. He stated:

"The best approach is to be a long-term trend follower. Trend following is statistically valid in the sense that everybody has tested it for years and years, and it works. "I acknowledge that the market trends maybe 20 percent of the time and chops back and forth in consolidation 80 percent of the time. The trick is how to define where the trend starts and where it stops. If when a market does trend, you get in at the right time, ride that trend and then get out at the right time, you'll make enough money to more than offset the losses you take during non-trending periods.

This quote sums it up what you have to get through to trend trade. You have to prepare your money management to get you through the chop periods so the trend periods can make you money.

swag, bookmark this.

Study it.

It will help you.