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

[Cirrus]

Quote from MarketAddict:

"The problem is most people only have one strategy to trade the market.. And that's a no no.. If you really want to be successful you have to have different strategies to trade different conditions.. "

How do you decide when to use a swing strategy and when to use a trend following strategy? Seems to me, you never know what the market will do, so trying to guess when to trend trade and when not to, just creates more confusion. This something I have always struggled with.
Thanks

 

[oilfxpro]

Here is today's chart showing trends

 

[bone]

Quote from oilfxpro:

It can save you from losing as much , but such money management systems are not shared or known.They are too complex and controversial to discuss , they also require special discipline to implement.

I don't think that is true at all. The fact of the matter is that many ET members just think of it as an afterthought - that somehow the entry signal needs to be the 'holy grail' and that everything else takes care of itself provided you have the ultimate trade entry signal.

Money ( position ) management need not be complex or controversial. Set your profit target and stop-loss level at the time of entry. Bump your sizing up incrementally when you are putting together winning trades - in other words, lever your consistency. Bump your sizing back after your second consecutive loser. That and a modicum of common sense will take you far.

 

[deaddog]

Quote from oilfxpro:

It can save you from losing as much , but such money management systems are not shared or known.They are too complex and controversial to discuss , they also require special discipline to implement.

It can save you from blowing your account. Money management can be as simple as risking no more that a certain % of your remaining account on each trade.
The main point is to have the discipline to implement your system.

 

[MarketAddict]

Quote from Cirrus:

Quote from MarketAddict:

"The problem is most people only have one strategy to trade the market.. And that's a no no.. If you really want to be successful you have to have different strategies to trade different conditions.. "

How do you decide when to use a swing strategy and when to use a trend following strategy? Seems to me, you never know what the market will do, so trying to guess when to trend trade and when not to, just creates more confusion. This something I have always struggled with.
Thanks

I can tell by looking at the 15 min chart and how the market is moving. Check your pm...

 

[AAAintheBeltway]

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.

This is of course the great weakness of trend following systems. I emphasize the word systems, not just using market direction as a filter.

Once you introduce the concept of adjusting parameters on the fly, eg resizing stops or numbers of contracts, you add a new level of complexity and run the very real risk of curve fitting. Reducing trade size also is problematic. Trend following systems tend to produce about 30-35% win ratios, with large drawdowns and consecutive runs of losing trade of>10. Few traders have the stomach or account size to deal with that. But the profitability of such systems is typically dependent on a few trades. Miss them or catch them with too small a position, and your system stats go out the window.

Commercial systems use all sorts of compromises to try to alleviate these issues. Mixing in a countertrend system is a common approach, as is using multiple lookback periods to trigger signals.

If you're not talking about actual trading systems but just using a methodology of trying to catch trends, then the challenge is to distinguish trending periods from chop and reversals. It's not easy, but backtesting and experience help. Personally, I like to identify a dominant direction from a higher order time frame, then trade in that direction only in a lower time frame, eg by catching pullbacks. If the higher order timeframe is in chop, you would look to fade extremes or just not trade, which is probably a better choice.

 

[Rabbitone]

Thank you for your thoughtfully worded reply.

I was not endorsing anyone. I could care less about the methodology of Bernstein or Sands. I trade only using only my plan which has no Bernstein or Sands in it. The point is I use these quotes because the words in them jog my memory as to how my plan is formulated.

Quote from oilfxpro:

Cut the crap!

Dennis was a failure trading for funds.Get your facts right.His original method has not been used since.They sell mentoring and services using the bullsheet of trend trading , and those thousands of books written by failed traders.

:

 

[masterm1ne]

Quote from oldtime:

If I was to hand you a pile of charts, some of them 5 min and some of them daily and they had no information on them, just candlesticks, I doubt you could accurately separate them into the proper category. (other than the 5 min may have stronger smoother trends.)

Thank you, one of the most logical posts on this thread.

Who the f*k cares what the definition of trend following is. The "trend" is subjective. I can apply the same method to daily/5min time frames and make money following the trend. If I'm in and out in a day yes I'm day trading but I'm trend following too. I don't care what some random dude wrote on wikipedia! For goodness sake don't overcomplicate things.

Quote from oldtime:

days, weeks, months and years??? You trade that noise crap?? Heck I have positions that were put on by my great great grandfather and have been passed down through the generations. Which reminds me, the bar on my hundred year chart is about finished, time to start a new one. So, what's a chop? It doesn't show up on century charts.

Thanks for the literal LOL. No wonder you alias oldtime

 

[murray t turtle]

Quote from deaddog:

If they blew their account there was no money management strategy in place....

====================
Good point;
unless one is still learning to trade,
or hasnt learned the BIG diffrences between bull trend/bear trend.
=================
Even risking a small amount [1%];
thats less than 100 losing [OR ''EDUCATIONAL''] trades.

Thats wisdom.
So to answer question, ''can money management save a trader in chop'' No- but it can slow the go to zero-goose egg
%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

 

[trefoil]

Quote from RCG Trader:

If you are confident of your system, don't stress it. Your system should be the opposite of the casino. The longer you play the more likely you are to win.

Takes away stress.

Yeah my son gave me this look and said "But I thought there were always supposed to be bad days and good days".
That was at 1PM. That one bit of conversation prevented me from doing something seriously stupid, so that by 3PM all was back to something vaguely resembling a decent day.