Sunday, January 06, 2013

Some winning trades from fellow trend followers

Below are some of the stocks in which other traders I know have used the system and its scans to find some very profitable trades in a short period of time. I have not traded these stocks myself, but they fully meet the criteria as set out in the scans, and also meet the 'visual' characteristics that we look for when identifying the set ups we want to trade.

By having an 'emotional indifference' to each position, there is no hesitation in opening a trade when the criteria are met. This is easier to do when a traders' risk limits are at sensible levels. When you get setups like these, all you can lose is a small element of your equity*, and there is potentially unlimited upside.

(* This assumes there is no adverse gap down through your stop level, which again should be factored into your individual and overall portfolio risk parameters).

Trend followers do not set price targets, other than zero for a short, or infinity for a long. So when you get a trade go in your faviour like those shown below, it is quite easy to see how you can make a decent amount of money in a short period of time.

Quite often there are days when there are few set ups appearing, others when it can almost be like 'throwing darts' as great number of stocks come up on the scans. From there it is a question of going through and selecting those with the best potential reward:risk opportunities, the best 'visual' set up, and considering other factors like the width of the bid:ask spread, the volatility etc.

As I've mentioned previously, I impose a limit of the number of positions I can open on any given day, which can be frustrating when you get great numbers of potential trades cropping up on the scans, but experience has taught me to do this, particularly with the lack of trends that have fully developed in the underlying indices over the last couple of years. This helps me avoid getting into too many positions, too quickly, only for the markets to reverse trend or whipsaw around.

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