Does Traditional Trading Advice Work?

[BlowFish 10]

Sorry. Stopped Out at Break Even.

 

Ahh, thanks. Learnt something new there:) Actually the two charts where pretty interesting too from the point of view of how someone might manage the meanderings of price between 'R' and 'S'.

[gifropan 10]

Just posting a chart of my trading today to illustrate the point i made earlier in the thread.

 

It was a really slow and boring today, there was a complete lack of volatility in the market and after the worse then expected figures we just trended down all day. I had four trades, all going with the trend using a trading style that i like to use when volatility and momentum is low. I went with the trend,adjusted my came plan to how the market was trading, and i walked away with 8 points on ES, and not one of my trades was a buy.

 

Do you need a better example of the trend is your friend?

 

 

How does support/resistance match up with trends. Because as the price approaches a support, for example, it is in a short term downtrend. So buying at support you are not actually going with the immediate trend or are we buying in the slightly higher time frame which would make it in the direction of the trend.

[gifropan 10]

You say you only use a 5 tick stop. What profit target do you use if you stop is only 5 ticks and how long do your trades last? I always find that close stops get taken out all the time.

[86834 10]

You say you only use a 5 tick stop. What profit target do you use if you stop is only 5 ticks and how long do your trades last? I always find that close stops get taken out all the time.

 

 

I hate these types of questions lol

 

5 ticks is just fine for my trading, but it all depends on market conditions, if there's massive momentum and volatility in the market then at times i will go up to a 2pt stop, but only rarely. If you're right you're right, if you're wrong then you're wrong, no need to use a massive stop. Plus if a trade changes after i'm in it i'll just scratch it or take a 1tick loss on it.

 

As for exit targets, once again, all depends on how the market is trading. For example yesterday was pretty damn slow, complete lack of volatility etc, so i was just taking 2pts on my trades. Near the end of the day we broke the tight range of the session and momentum kicked in and i took 6pts on that trade. It's all about feel, being able think quickly on your feet and being fickle. There's no A+B=C in trading, you just have to put the time in to develop your feel and find what suits you, because no two traders are the same.

 

I know it's not the answer people want, but it is what it is.

[DbPhoenix 42]

It's all about feel, being able think quickly on your feet and being fickle. There's no A+B=C in trading, you just have to put the time in to develop your feel and find what suits you, because no two traders are the same.

 

I know it's not the answer people want, but it is what it is.

 

It's also about having a trading plan and a well-thought-out strategy, which is a far more rare combination than it should be.

 

Learning to trade via message board posts will only take one so far, like from here to here. If one wants to get from here to ........................................ here, that takes a bit more work.

[86834 10]

It's also about having a trading plan and a well-thought-out strategy, which is a far more rare combination than it should be.

 

Learning to trade via message board posts will only take one so far, like from here to here. If one wants to get from here to ........................................ here, that takes a bit more work.

 

What he said

 

You wouldn't think you would become a top barrister by just reading a few books and an internet forum would you...

 

I do find it shocking the amount of people who think trading is going to be easy to learn and is a quick path to riches.

 

It's a job, a professional job and it takes time to get anywhere with it.

[DbPhoenix 42]

What he said

 

You wouldn't think you would become a top barrister by just reading a few books and an internet forum would you...

 

I do find it shocking the amount of people who think trading is going to be easy to learn and is a quick path to riches.

 

It's a job, a professional job and it takes time to get anywhere with it.

 

This is an excerpt from something I posted yesterday. It's made the rounds, and old-timers will already have read it.

 

38 Steps To Becoming A Successful Trader

 

1. We accumulate trading information - buying books, going to seminars and researching.
   
   
2. We begin to trade with our 'new' knowledge.
   
   
3. We consistently 'donate' and then realize we may need more knowledge or information.
   
   
4. We accumulate more information.
   
   
5. We switch the commodities [or stocks, or futures, or...] we are currently following.
   
   
6. We go back into the market and trade with our 'updated' knowledge.
   
   
7. We get 'beat up' again and begin to lose some of our confidence. Fear starts setting in.
   
   
8. We start to listen to 'outside news' & other traders.
   
   
9. We go back into the market and continue to donate.
   
   
10. We switch commodities again.
    
    
11. We search for more trading information.
    
    
12. We go back into the market and continue to donate.
    
    
13. We get 'overconfident' & market humbles us.
    
    
14. We start to understand that trading success fully is going to take more time and more knowledge then we anticipated.
     
    Most People Will Give Up At This Point As They Realize Work is Involved
    
    

[86834 10]

This is an excerpt from something I posted yesterday. It's made the rounds, and old-timers will already have read it.

 

38 Steps To Becoming A Successful Trader

 

1. We accumulate trading information - buying books, going to seminars and researching.
   
   
2. We begin to trade with our 'new' knowledge.
   
   
3. We consistently 'donate' and then realize we may need more knowledge or information.
   
   
4. We accumulate more information.
   
   
5. We switch the commodities [or stocks, or futures, or...] we are currently following.
   
   
6. We go back into the market and trade with our 'updated' knowledge.
   
   
7. We get 'beat up' again and begin to lose some of our confidence. Fear starts setting in.
   
   
8. We start to listen to 'outside news' & other traders.
   
   
9. We go back into the market and continue to donate.
   
   
10. We switch commodities again.
    
    
11. We search for more trading information.
    
    
12. We go back into the market and continue to donate.
    
    
13. We get 'overconfident' & market humbles us.
    
    
14. We start to understand that trading success fully is going to take more time and more knowledge then we anticipated.
     
    Most People Will Give Up At This Point As They Realize Work is Involved
    
    

 

bang on mate, couldn't of said it better

[otto215 10]

I do reconigze that!

[marcj 10]

Hi

 

What a Question. I say yes and no. All has to work together. I've devoted an entire website to this question.

Trading-Seminar - USA; - Home-Home

 

I hope this helps.

 

marc

[windsurfer 10]

It seems everyone agrees that trend-trading works, although the evidence presented seems mostly anecdotal. FWIW, here is what my testing shows:

 

1. swing and long-term trading- trend trading does not work for stock index futures (e.g. ES) and has not worked for many years. Still works generally for commodities, although not in the last year.

 

2. day trading- will work with the right strategy (such as mentioned by many of the contributors), but not so much this year, where there have been an inordinate number of afternoon reverses- look at yesterday (June 10) for example.

[diablo272 10]

It seems everyone agrees that trend-trading works, although the evidence presented seems mostly anecdotal. FWIW, here is what my testing shows:

 

1. swing and long-term trading- trend trading does not work for stock index futures (e.g. ES) and has not worked for many years. Still works generally for commodities, although not in the last year.

 

2. day trading- will work with the right strategy (such as mentioned by many of the contributors), but not so much this year, where there have been an inordinate number of afternoon reverses- look at yesterday (June 10) for example.

 

Your input is appreciated, however, that means nothing without specifying what exactly you define as "swing and long-term" and "day" trading. If you simply say something like "a strategy that exploits the trend does not work for day trading," that statement really doesn't mean very much, because there are many different ways to trade intraday. Of course, it would also help to know what you mean by "trend trading".

[windsurfer 10]

Your input is appreciated, however, that means nothing without specifying what exactly you define as "swing and long-term" and "day" trading".

 

"Means nothing" unless I define 3 basic trading terms?

 

Hmmm.

 

I'll give 1 example before I go. Take your favorite trend system (MA cross, MACD, breakout) and run it on a daily chart of the ES for the last 10 years. What do you find?

 

Now I'll bow out and let the trading myths and anecdotes continue.

[thalestrader 14]

"Means nothing" unless I define 3 basic trading terms?

 

Hmmm.

 

I'll give 1 example before I go. Take your favorite trend system (MA cross, MACD, breakout) and run it on a daily chart of the ES for the last 10 years. What do you find?

 

Now I'll bow out and let the trading myths and anecdotes continue.

 

Hi there,

 

No need take a bow, friend. What we have here, no doubt, is failure to communicate.

 

I think that while you understand what you intended to communicate in your first post, it was not presented in such a way as to allow those of us who are not as wise as you to comprehend.

 

For example, the phrase "trend trading does not work" seems just a bit vague. What do you mean by "doesn't work?" Do you mean that it is unprofitable to trade with the trend? Or do you mean that trend following produces a small percentage of profitable trades relative to losing trades? Or do you mean something else altogether?

 

In my experience, I have found that it is best to define one's terms as accurately and comprehesibly as possible, for we cannot assume that one's interlocutors possess the same understanding as does oneself.

 

 

 

Best Wishes,

 

Thales

[windsurfer 10]

Hi Thales,

 

I meant unprofitable. I attach a performance report on a simple Moving Average Crossover as an example.

[windsurfer 10]

Oops- that was a long only example. Here is the result using a standard (12,26,9) MACD long and short on 10 year daily ES data with $25 RT for slippage and commssion..

[DbPhoenix 42]

Oops- that was a long only example. Here is the result using a standard (12,26,9) MACD long and short on 10 year daily ES data with $25 RT for slippage and commssion..

 

If you're defining trend as an MAXO (or any other indicator cross or hook or whatever), then of course you're correct; it won't work. But an MAXO is not the traditional definition of "trend", i.e., higher highs and higher lows or vice-versa. Yesterday, for example, there was a very nice trend in the NQ from the market open to 14:00, then another in the opposite direction until the close.

[windsurfer 10]

Hi db,

 

Per my first post, I agree with you that there are intraday trends that can be profitably traded, although it has been more difficult recently. Perhaps others have also found this.

 

btw, I found yesterday more difficult than you did, db. (smiling).

[DbPhoenix 42]

Hi db,

 

Per my first post, I agree with you that there are intraday trends that can be profitably traded, although it has been more difficult recently. Perhaps others have also found this.

 

btw, I found yesterday more difficult than you did, db. (smiling).

 

If it were easy, everybody would be doing it.

 

Oh wait......

 

[thalestrader 14]

Hi Thales,

 

I meant unprofitable. I attach a performance report on a simple Moving Average Crossover as an example.

 

Hi Windsurfer,

 

Thank you for clarifying your meaning. That moves us in the direction of what might prove to be a fruitful discussion, and I hope you will humor me as I do find this to be an interesting topic, and I myself am not at all clear on how I'd respond the facts stated in your report.

 

For the purposes of our discussion, you are of the opinion that trend trading does not work, by which you mean to say that trend trading is unprofitable.

 

Furthermore, for our purposes here, you define a trend in terms of the relationship of two moving averages to one another.

 

Would you agree, however, that such a definition of a trend, and thus what it means, strictly speaking, to be a "trend trader," may not be a universally accepted means of defining a price trend?

 

Would you be willing to accept that, strictly speaking, there exist, in any particular time frame, three possible trends in which price can move: 1) an uptrend, characterized by a series of higher price highs and higher price lows, 2) a down trend, characterized by a series of lower price lows and lower price highs, and 3) a sideways trend, characterized by a series of overlapping price movements resulting in no measurable net movement up or down?

 

In other words, would you be able to agree with me, that a trend is primarily determined by the movement of price itself, and only derivitively and thus, arbitrarily defined by, say, a moving average, which is an average of price movement over a period of time selected by the technician, and not dictated by the observable movement of price itself?

 

I think that is enough for now, as in order for us test your opinion on the workability of trend trading, we must make sure that we are in agreement as to the basic terms of the discussion.

 

I appreciate your patience with me.

 

Thank you,

 

Thales

[sevensa 10]

Hi Thales,

 

I meant unprofitable. I attach a performance report on a simple Moving Average Crossover as an example.

 

I think this is pretty common knowledge that moving average crossover systems are not profitable. Applying a known non profitable trending system to a market doesn't prove that the market is non trending; it proves that the system as applied is not profitable.

[erierambler 10]

I think this is pretty common knowledge that moving average crossover systems are not profitable.

 

I disagree................

 

 

 

erie

[sevensa 10]

I disagree................

 

 

 

erie

 

Not sure what this proves either, or that this is even a MA crossover system for that matter. This is pretty easy to curve any system and post a screen print of a profitable sample. However, I have no interest to get into an arguement about this. If you are happy with your MA crossover system, assuming this even is one, then good for you.

[thalestrader 14]

I think this is pretty common knowledge that moving average crossover systems are not profitable. Applying a known non profitable trending system to a market doesn't prove that the market is non trending; it proves that the system as applied is not profitable.

 

I agree (with some reservation) and thank you for putting this so succinctly. What I would like to see is the case laid bare showing that trend trading is indeed profitable so ong as one is trading based upon what price is doing, and not on the results of an arbitrarily selected arithmetically derived value(s) from price.

 

My reservation is simply this: While I do not use and would not use such a system to make trading decisions, I would hesitate to argue that all such systems are unprofitable. With a money management system based upon position sizing based upon predetermined inital hard stop points, I believe that even a random entry method could be profitable over the long term.

 

Best Wishes,

 

Thales

[erierambler 10]

Not sure what this proves either, or that this is even a MA crossover system for that matter. This is pretty easy to curve any system and post a screen print of a profitable sample. However, I have no interest to get into an arguement about this. If you are happy with your MA crossover system, assuming this even is one, then good for you.

 

 

All anyone has to do is write the ma crossover system for themselves or get someone to write it for them to prove whether blanket statements ,"this is not profitable" is true or not. It's not rocket science. I don't care if you believe me or not. That is not my problem......... It is a breakout strategy of a ma crossover. Remember to keep an open mind and try all timeframes and different combination of ma's.

 

erie