Wednesday, June 22, 2011

Quick update

The increased volatility in the markets pretty much all year, allied to the lack of direction in the indices has resulted in my exposure being extremely light for too long now. Following the drawdown after the sharp reversal in Mid March (where I was caught with a number of short positions) I have been waiting for some sort of market direction to become apparent. And, although volatility is still high, there does seems to be a 'drift' downwards. Whether this will develop into a full blown downtrend, or another false breakout, is anyone's guess.

The other problem is that in recent days I have actively been looking for individual stocks to trade, yet hardly any suitable candidates have cropped up on my scans, be they UK, US or European! So I'm getting to the point now where I'm champing at the bit to start getting some positions on. Hopefully this will happen over the next few days, although I will be wary of rushing in and putting lots of trades on in a short period of time.

I would post a chart of the FTSE showing the messy state of the index, however for some reason blogger refuses to upload the chart (any ideas?).

I guess proponents of cycle theories (such as The Delta Phenomenon etc) having been loving 2011 to date - 3 or 4 days in one direction, before 3 or 4 days in the opposite direction. My timing skills are not good enough to follow this type of trading, and buying lows and selling highs goes against my own well-ingrained philosophy on trading.

During this period where my trading has been very light, I have looked at using my strategy for other markets such as forex, commodities etc but the back tested results show that the results are at best inconclusive - changing basic parameters and/or timeframes does not show any improvement either.

As most of you know, the major trend followers of the past and present (such as Richard Dennis and the Turtles, Ed Seykota etc) traded principally a basket of commodites, stock market indices and foreign currencies. My own experience is that I actually find stocks trend better (certainly in the last few years) . This is pretty confusing as my own method of trading has been dervied from well known historical trend following systems, unless you get in a situation such as mid-to-late 2008. It may be that these markets simply do not trade as well as the past. Trading forex for example does have significant advantages in that tighter stops can be placed, no overnight gaps etc. If any other traders who trade these markets using a trend following method have any suggestions/opinions, please let me know.

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