Saturday, November 10, 2018

Trading the downside - remaining faithful to the process

The last couple of months have been very positive as profitable downtrends have appeared in a number of stocks, both at home and abroad. Fortunately, I have been able to profit from some of these (while suffering small losses in a few others!), and while some which developed into downtrends have now triggered their exit signals, prices in others have remained in a downtrend.

This has potentially meant I may have been able to profit from the downwards move while those who trade longer-term trends have had to suffer an erosion of open profits, or even suffering losses, from a pullback or retracement within the context of a prevailing longer-term uptrend.

Saturday, November 03, 2018

Recency bias, and labelling markets as easy or hard

I've seen it said that one of the goals you should have as a trader is to try and make money when things are easy, and that you should be more defensive and protect what you have when things are hard.

That is all very laudable, but from a trend follower's perspective there is a problem with that.

Saturday, October 27, 2018

You think the markets are volatile? Think again...

I've mentioned a few times this year, both here and on social media, that the current levels of volatility may seem quite high (certainly compared to the more 'normal' recent levels), but these are nowhere near the levels seen in 2008.

To show what I am talking about, at the bottom of this post I've shown the monthly chart of the Dow going back to the early 1970's. And then, I created a simple measurement to show the change in volatility, by taking the typical 2ATR measurement calculation and expressing this as a percentage of current price.

Trading the line of least resistance

A lot of the people who were profitable in 2008 became unstuck the following year. They seemed to get in their head that, once the markets started rallying, they were anticipating a further, more pronounced price drop.

In the summer of 2009, they got their chance. There were numerous trading blogs of the day talking about a 'head and shoulders' pattern which had formed on the indices between May and June, and they were going to use this as a trigger to go short the market, and really make a killing.