Tuesday, May 15, 2012

Que sera sera

It always amuses me when you see trading blogs and sites trying to 'predict' where a market will go based on some form of technical analysis, usually accompanied with some form of chart with indicators and sqwiggly lines drawn all over it. This is especially true of those who prefer to trade shorter timeframes, or on an intraday basis, where news events and/or economic releases can easily play havoc with these predictions, such as in the current climate, what with the political uncertainty in the Eurozone taking place.

As trend followers, we are solely concerned about waiting for potential trends to form (as defined by our entry rules), and then to simply follow the price trend in whatever direction it takes. Trend followers such as Market Wizard Ed Seykota have stated that trend following doesn't necessarily work on shorter (i.e. intraday) timeframes due to the inherent volatility present. Most CTA's and successful trend followers utilise daily or longer timeframes to avoid this problem.

So remember, when trend following no prediction is required and, providing you use appropriate risk management and proper use of stops, you suffer little or no stress as a result. What will be, will be.

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