Sunday, December 04, 2016

Jack Nicklaus and trading - part 2

One of the most popular posts on this blog is 'Jack Nicklaus and trading', where I listed a number of quotes the Golden Bear made over the years. These should have a particular resonance when placed in a trading context, be it your own approach to the market, or the psychology involved.
Below I've pulled out a few more of Jack's quotes, which again may require some thought on your part, but the underlying message can easily be applied to trading.

Saturday, December 03, 2016

The breakout stop comes to the rescue (again)

In the second half of 2011, and in particular the last quarter, I was experiencing a frustrating time. The markets were volatile, and I suffered a number of trades where price initially broke out in my favour, only to sharply reverse and end up generating losses around a full -1R. This was because those trades had not been open a sufficient length of time for my trailing stop to start moving from its initial price level.

The trade that really stung was a long position in a small UK stock in November 2011. After initiating the trade, my open profits reached about +5R after only three days, yet my initial stop had not moved, based on the rules I used at the time. Then, price did a sharp about-turn, and three sessions later, I was stopped out for a full -1R loss.

After this happened, I retreated to cash and took a break to think.

Monday, November 21, 2016

Trend following, unrealistic expectations and a look into a fund's performance

Some people have unrealistic expectations when it comes to trend following - and trading in general, for that matter. 

I remember a trader contacted me once about some mentoring and essentially was looking for some assurance that, if he adopted a trend following approach, he would be able to make a +100% return over the next year.

Sunday, November 20, 2016

Gearing up for 2017

In recent months, one of the most popular posts on the blog has been 'Trend following is dead - apparently...'

I wrote this back in 2010, based on the fallacy that every few years, people talk about how trading trends no longer works, trend following is so 1980's, etc. All this talk usually coincides with a period of poor or non-performance.

We know that markets always go through different market 'states' - either trending or non-trending, stable or volatile. What we don't know is when they will move from one state to another. And when they do start to trend, we can never predict the magnitude of the resultant trend.