trend following delusion shattered

[John47]

You pretty much echoed alot of my beliefs right there. Especially because.....my trade management system....I employ a trailing stop...so even a good entry on a bad trade could mean break even. Check my journal every once in awhile and I'm sure I'll give you a few PM's....thanks brol.

john

Quote from Lefty62151:

Hello John:

At least you got one of the trend days. I understand completely when a trader says he missed an entry or got shaken out. The real challenge for a trader is to pick the right stop loss, and to keep your hands off the mouse. I used to get shaken out all the time, till finally I found a way to keep myself on the right side. It is still a real challenge to see price retrace and have to talk myself out of taking profits. As far as I am concerned, once a trader has his technique down, the big challenges are

1. Choosing a decent stop loss.
2. Knowing when to put on size.
3. Keeping from taking profits too soon.

If these are problems for you too, let me know (PM me), maybe I can help you out.

Lefty.

 

[PetaDollar]

Quote from hank rollins:

may i qoute william gallacher from "winner take all"

"chart readers might also ponder the philosophical implications of forecasting by lookign backwards. the notion that prices evolve in predictive patterns is consistent with deterministic view of the universe. frankly, i doubt prices are pre ordained. it is possible, i suppose, and what a joke that would be on all of us! "

Like Justin Mamis said, "TA is attacked for what people wish it could do". Trend followling like any TA is a risk management tool, not a price prediction tool. Once again, this is why Nickel's demand for a predictive model using trends it downright silly. There is no such model and that is *not* inconsistent with the fact that trend following is valid TA.

 

[PetaDollar]

Quote from John47:

greatbut a poor entry led to my stop being hit before i caught the move.

The problem is that you are setting your stops according to $$ risk, not according to the price level where the trade has a lower probability of working out. If the $$ risk is too high to put your stop in the right place, don't take the trade. Again, "right place" means it corresponds to a lower probability of the trade working out. You have to do some work to figure out where that is, but you will be very well rewarded for it.

 

[PetaDollar]

Quote from NickelScalper:

Efficient with respect to publicly available techniques means that, like 19 out of 20 of your fellow daydreamers, when the end of the free ride came, you would have gone down with the ship.

Forget trends TA... how long do you think before us profitable support and resistance traders go broke? I learned much of what I know from Wycoff's book written in 1905 and Magee's book originally published in the 50's or 60's, I think.

 

[NickelScalper]

Quote from peterfigliozzi:

Like Justin Mamis said, "TA is attacked for what people wish it could do". Trend followling like any TA is a risk management tool, not a price prediction tool. Once again, this is why Nickel's demand for a predictive model using trends it downright silly. There is no such model and that is *not* inconsistent with the fact that trend following is valid TA.

Evidently, you have learned very little so far.

It is impossible to add value without predicting price.

 

[NickelScalper]

Quote from peterfigliozzi:

Forget trends TA... how long do you think before us profitable support and resistance traders go broke? I learned much of what I know from Wycoff's book written in 1905 and Magee's book originally published in the 50's or 60's, I think.

How long before the rare "profitable" traders of this type can formalize what they are doing, automate it and become billionaires?

Answer: never.

 

[postal]

Hey I'm new here.
Somebody's saying trend following don't work. Nah, it works. I made a bunch a dough past few years with trend following. Works great.
Postal

 

[PetaDollar]

Quote from NickelScalper:


It is impossible to add value without predicting price.

Although i'm sure there are folks making money by predicting price (perhaps you are one of them), i've never actually met one.
All the good traders I know use probability instead.
Personally I didn't start turning regular profits until I got rid of the prediction framework. Also, there was a long time where I thought I surely wasn't predicting price, but in fact I was. These things are part of the long and painful growing process that an "at home" guy has to sustain. The only way to avoid it is to come up through a professional training program (NOT an internet guru) where they teach the probability framework from the beginning.

 

[NickelScalper]

Quote from peterfigliozzi:

Although i'm sure there are folks making money by predicting price (perhaps you are one of them), i've never actually met one.
All the good traders I know use probability instead.
Personally I didn't start turning regular profits until I got rid of the prediction framework. Also, there was a long time where I thought I surely wasn't predicting price, but in fact I was. These things are part of the long and painful growing process that an "at home" guy has to sustain. The only way to avoid it is to come up through a professional training program (NOT an internet guru) where they teach the probability framework from the beginning.

In that case, explain how a method can add value without being able to anticipate whether price will move both in the right direction and to a certain minimum extent after the trader has committed to a prospective entry.

 

[PetaDollar]

My favorite example is a retracement. Being that I study trends in different markets, once a trend is in place I know exactly how much it should retrace and still have a decent chance of continuing on to an even higher high (or low, as the case may be). Thus I enter when price retraces to this point and quickly exit if it continues past for a small loss. I also know exactly how it should behave after I enter, and if it doesn't, I exit. I don't wait around for that stop to get hit. Small loss, small win, big win = adding value to your account. Of course the probabilities change with time, but that's how we earn our money as traders-- by monitoring and adapting-- and that's exactly why you can't flip a switch and make a billion dollars (although i'm sure AMT4SWA is getting close). You can automate to some extent, but as EricP will probably tell you, you still have to do the monitoring and adaptation part by hand.