Is this seriously what trend traders do?
- Thread starter IronFist
- Start date
Not a trend trader that makes money. What you describe is the result of some one that does not understand market structure. I enter the trend on a technical retracement and exit when the technicals that support the trend change. The worst case (which rarely happends is two attempts to enter the trend.
That is exactly what the masses do or more like try to do, but let's face it, if you don't live to play the game and play better, masses can't do the above. They change stops or remove them.
Since late 1991, in long term Commodities, every single entry been against the trend, whether original opening or add-on trades, and I have had a number of in a row of losing trades, very hard and random of finding extremes in the marketplace. Now this works in Commodities generally because of 9 year cycles, chances are there be a nine year high and low and often times there is some type of containment due to crops or economies so unlike stocks that go up 65% of the time and less so of having a high to never be broken, commodities seem to not be forever one sided. So instead of concentrating on entries, you work on hedging so you don't end up broke.
Past year I have spent just back testing stocks/ETFs as I no longer manually trade, where I enter as far as percentages, makes no difference where I get in as long as the hedge is right, getting in low or higher still has 50/50% chance, the only main differences and my edge is spending my time learning different ways to reduce risk. Reduce risk, you reduce drawdown, when you learn how to lose less often, profits take care of themselves. My early years I have learned how to get in low to buy, and now so much later in life, although nice to have that knowledge, have foolishly wasted much time on learning to buy low instead of learning ways of reducing risk for longer term trading.
I love to scalp and most systems recently have been geared to scalping as it generally is trading "noise", reversion to the mean, I do try most of the time involve trend but many lunch breaks are pure chop and ultimate of buying low/selling high for few ticks accumulate. Day trading systems are very much though buy, get to break even plus one tick then get stopped out, just waiting and repeating dozen trades and more for the ten or twenty pointer, Or get days where there is wide chop and have days where several trades just lose, part of this business. Losing days are always much greater than profitable days for me, often times to recover might take a month of trading, loses happen and not out of trading too heavy or making mistakes as automated, it is market not cycling as "normal" to my systems, you either be prepared or find a different business to be in.
I find it funny that people think that OP original post is more random then when you have some kind of strategy telling you to go long or short at some point... Maybe you have 'proof' of a better probability but it is still as random as the system in the OP post. The only thing that really matters is trade management and exits. That are the only things you can control.
In terms of my own trading accounts I switched from short term trading (holding seconds, minutes, hours) to longer term "position" trading (holding days, weeks, months) ten years ago.
This is all a matter of balanced reasoning and perspective. You can't target 300 tics and bail every time a trade goes 10 tics against you. To put it another way, I can't reasonably try to capture several weeks of trading range and bail in the face of a single days trading range. I model trading ranges and volatility - and set my stop-loss and profit targets accordingly.
To be a successful trend or position trader rule number one is to accept that every entry you take is going to be underwater for some period of time. One of two things happens: 1. You get stopped out, or 2. You reach your profit target. If you're going to trade macro, you're going to take some heat.
This is all a matter of balanced reasoning and perspective. You can't target 300 tics and bail every time a trade goes 10 tics against you. To put it another way, I can't reasonably try to capture several weeks of trading range and bail in the face of a single days trading range. I model trading ranges and volatility - and set my stop-loss and profit targets accordingly.
To be a successful trend or position trader rule number one is to accept that every entry you take is going to be underwater for some period of time. One of two things happens: 1. You get stopped out, or 2. You reach your profit target. If you're going to trade macro, you're going to take some heat.
Reasons? Called much backtesting of your ideas with huge amounts of data and out of which you have distribution of bell curve what I am seeking for "bests" 3-4 ticks to enter that might be profitable, like in entering at top of a bar or 1,2,3 ticks above a bar, and by far this is the worst signals I enjoy having in my signals as for most like this way of entry and I don't, but some signals and price action to the left of now test well. It is not just about when "X crosses Y" and get in, it is about what recent price action dictates it is agreeable to take this signal. Let's take a slow movement down, if you shorted many small retracements they could be profitable, but if price drops like a boulder, any type of retracement might test out to be unfavorable even though "X crosses Y".
Check out BA Boeing for past 20 years, when it makes steeps monthly patterns, and next month breaks the lows or highs, I will buy Puts or more stocks and today bought Puts as I see rounding on highs and declined volume since Sept 13, some stocks instead of exiting, I keep forever cause good dividends and good volume on options so I can hedge open profits. So it is not just knowing the "whys" of entering or exiting, you can make trading KISS, you can design your own HFT systems and you can make it more complicated based on your back testing.
The big money has always been long term trading and so long as you have patience, you can be rewarded hugely. Day trading and scalping, you work way to much at it to make so little in terms of quality of life, yea, you do understand charting much better and helps in long term. I think exchanges saw huge fees in the 90s that can be made especially with electronics and by lowering margins suck in the under funded and under knowledge so members can make more. The scores of people losing is never going to change unless government steps in to foul it up, and those who have worked long hours will prosper. Pretty much the same with most businesses outside of trading.
There's another ET Member on another thread who has recently proclaimed that he wants to start a day trading only, flat-at-the-end-of-the-day hedge fund.
I never responded to his post, but my guess is that many CTA's would ask WTF would you want to do that? You are going up directly against bots and algos and machine learning programs and private firms that spend literally hundreds of thousands of $$$ per month on ECN infrastructure. The other point is that if you are going to be flat at the end of the day, you are seriously limiting the amount of $$$ you can realistically put to work. In fact, there's no way you could come close to covering your fund legal, accounting, and management requirements from the management fee on $10M AUM. Not close. Plus, that's a managed account where clients are going to pull out funds as soon as you have a losing month.
IMHO, one of the positives about position trading longer time frames is that the art and skill might still be valued and appreciated for what it is - high speed automated gamesmanship and the geek squad are not really necessary.
Just my own rant I suppose, YMMV.
I never responded to his post, but my guess is that many CTA's would ask WTF would you want to do that? You are going up directly against bots and algos and machine learning programs and private firms that spend literally hundreds of thousands of $$$ per month on ECN infrastructure. The other point is that if you are going to be flat at the end of the day, you are seriously limiting the amount of $$$ you can realistically put to work. In fact, there's no way you could come close to covering your fund legal, accounting, and management requirements from the management fee on $10M AUM. Not close. Plus, that's a managed account where clients are going to pull out funds as soon as you have a losing month.
IMHO, one of the positives about position trading longer time frames is that the art and skill might still be valued and appreciated for what it is - high speed automated gamesmanship and the geek squad are not really necessary.
Just my own rant I suppose, YMMV.
I made this thread because I have heard individuals say that people who do trend following make a bunch of small losing trades but then they finally get a large winner.
My own backtesting demonstrates that you need big winners to offset the losers. You also need to take every trade because you don't know when the massive one is coming.
I just reverse-engineered the way they must trade based on what they said. I have not met a trader who has a consistent system for determining the trend. Many people say when support becomes resistance, when higher highs and higher lows appear, when a moving average changes course, etc. Then, what you have is people who think the price is moving one way and enter protected by a small stop for a situation in which they are wrong. And they are probably wrong. They keep entering being "intelligent" by using stops and they might eventually get it right. Since they cannot tell which way price is moving I made my comment about why not enter with random prices as stocks tend to move up over time.
@Handle123 you said sometimes it takes you a month to recoup your account from a loss? You do counter-trend trading and building bigger positions as it goes against you I believe you said.
The few people I've spoken to on this site who I feel may actually be successful traders (and yes you are one of them) trade this way. I don't mean they add to trades going against them, but they are absolutely counter-trend.
And this is from a guy who spent a lot of time absorbing the jjrvat method and even quantified it into a 100% mechanical style that tested profitably (fuck your gurus) although to be fair I completely changed it as it was originally a scalp system and as jjrvat was either unwilling or unable to explain how he did it that way, my only way to have positive expectancy was to hold every trade as long as possible.
I even talked with someone who had membership in anek's channel although I mean the way they really traded not the program on here, and that wasn't even trend following, it was bottom and top calling, sort of, which is different.
All this being said, "trend followers" don't even agree on how to identify a trend, so they're practically entering randomly, and infrequently price goes in their direction which they rationalize as the trend, even though they got it mistaken lots of other times they began to create a position.
My own backtesting demonstrates that you need big winners to offset the losers. You also need to take every trade because you don't know when the massive one is coming.
I just reverse-engineered the way they must trade based on what they said. I have not met a trader who has a consistent system for determining the trend. Many people say when support becomes resistance, when higher highs and higher lows appear, when a moving average changes course, etc. Then, what you have is people who think the price is moving one way and enter protected by a small stop for a situation in which they are wrong. And they are probably wrong. They keep entering being "intelligent" by using stops and they might eventually get it right. Since they cannot tell which way price is moving I made my comment about why not enter with random prices as stocks tend to move up over time.
@Handle123 you said sometimes it takes you a month to recoup your account from a loss? You do counter-trend trading and building bigger positions as it goes against you I believe you said.
The few people I've spoken to on this site who I feel may actually be successful traders (and yes you are one of them) trade this way. I don't mean they add to trades going against them, but they are absolutely counter-trend.
And this is from a guy who spent a lot of time absorbing the jjrvat method and even quantified it into a 100% mechanical style that tested profitably (fuck your gurus) although to be fair I completely changed it as it was originally a scalp system and as jjrvat was either unwilling or unable to explain how he did it that way, my only way to have positive expectancy was to hold every trade as long as possible.
I even talked with someone who had membership in anek's channel although I mean the way they really traded not the program on here, and that wasn't even trend following, it was bottom and top calling, sort of, which is different.
All this being said, "trend followers" don't even agree on how to identify a trend, so they're practically entering randomly, and infrequently price goes in their direction which they rationalize as the trend, even though they got it mistaken lots of other times they began to create a position.