Tuesday, December 11, 2012

The year in review

As this year draws to a close, I need to remind myself that, considering the lack of trends in the indices, I am pleased to still be showing a positive result for the year. This is despite the last few weeks being pretty rough - the reasons for which I have covered on several recent posts. A lot of the major CTA's that employ trend following methods are showing small losses for the current year-to-date, which puts my own results into context.

As I say to any person interested in learning about trend following - to make profits, a trend follower needs a trend! Blindingly obvious but the ups and downs of my own results this year show that perfectly - up to mid September things were going swimmingly, in spite of a somewhat choppy uptrend, prior to the markets moving downwards before rallying hard over the last few weeks.

In my own positions, I've had days where short positions go up, and long positions go down (or not both participating at all in a general market rally). All I can do is look for good setups based on my entry criteria, open the position, and then let them play out. I've also had 2 or 3 recent positions sharply reverse against me due to news releases, which are an occupational hazard of trading stocks.

The indices clearly show that, over the last couple of years, some form of range-bound style or shorter term trading has almost certainly been more profitable than the trend following approach.

As I've mentioned in a few posts though, at some point the pendulum will swing the other way when a pronounced trend takes off.

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