Sunday, February 05, 2017

A positive start to 2017

Markets always go through different market 'states' - either trending or non-trending, stable or volatile.

During the last couple of years it has been difficult (but not impossible) in making money adopting a trend following approach, for me using my preferred timeframe and parameters. That is the nature of the beast. You cannot force the market to march to your beat. You can only take what it is prepared to give you.

Thursday, January 26, 2017

Controlling your losses, good trades and bad trades

Good traders continually worry about trying to minimise any potential downside. By the same token, they try to avoid placing any restrictions on the potential upside.

Take the four possible scenarios on any individual trade: 

  • Big win; 
  • Small win; 
  • Small loss; and 
  • Big loss. 
Good traders try to avoid the big losses at all costs. If you have a robust trading approach that has a positive expectancy, then the small losses can easily be recovered from.

Saturday, January 07, 2017

Focus on what you can control

One thing that has always confused me is where people say you can always learn something from a losing trade.

The fact is that, once you are in a position, it is the buying and selling decisions of other market participants which will determine how price moves, and whether you make a profit or a loss. Nothing else. And how many of those other traders can you control or influence???

I talked about this in more detail referring to trading's equivalent of the 'butterfly effect'.

Sometimes you can do everything right in a trade, and lose. That's because no-one has the ability to predict what will happen in the future.

Monday, January 02, 2017

Some thoughts on differing trend following performance

Even if you adopt a trend following method, the nature of the price action in the markets traded will affect the performance that different trend following methods can achieve.

Thanks to Michael Covel's excellent book on the Turtles, we can review the performance achieved by those traders*. And we can see that, even though they were all looking at the same basket of instruments, the traders achieved wildly differing results.