Markets always go through different market 'states' - either trending or non-trending, stable or volatile.
During the last couple of years it has been difficult (but not impossible) in making money adopting a trend following approach, for me using my preferred timeframe and parameters. That is the nature of the beast. You cannot force the market to march to your beat. You can only take what it is prepared to give you.
It is when things are against you that developing the skills in cutting losses, being patient and disciplined in controlling their risk and market exposure will pay dividends.
But as I said in this post, the tide can turn at any time, from one market state to another, which may better suit your own preferred method, timeframe or parameters.
Remember we are looking to play the trading game possibly for the next 30-40 years. It is the compounding of returns, while utilising a method that has positive expectancy which you can follow, combined with good risk control, which will enable you to achieve solid long-term performance.
As it is, 2017 has started promisingly. While I have been stopped out of some trades which started off well before reversing, with the current open profits on my remaining positions, I am close to eliminating the drawdown I have been in for a while, and therefore near to making new equity highs.
While these open profits could easily evaporate overnight, it again shows how by aggressively cutting your losses and remaining disciplined in your approach, you keep the drawdowns you suffer as shallow as possible, making it easier to recover.
It also shows how quickly things can turn around once you get into one or more positions where price starts to move in your favour.
Well Done Steve!! Great trading!ReplyDelete
Steve, are you profitable on positions you opened in January or December last year? As I see it, January hasn't favoured breakouts, the last really good buying period was first half of December. I think mostly banks broke out massively at that time. What is your view on current conditions? Good luck!ReplyDelete
Hi Jure thanks for the comment. I currently hold 3 positions, all opened in January.Remember that I place no reliance on the indices to determine when to be in the market, or in what direction. I do not trade the indices - I trade individual stocks, so I am only concerned with the price action and the setups in those stocks. If I identify a set up which then triggers an entry, then there is no reason NOT to take it. Some traders would actually argue that if a set up breaks out despite poor action in the indices, that is actually better, as it is showing a high level of relative strength. Hope this helps.Delete
I understand. My conclusions were the same, how indices move is irrelevant for position trading. Nowadays I simply count successful breakouts and adapt my trading. In January this number was only 1 out of 10 for me, December last year was much better. But I trade US stocks.Delete
Anyway, thanks, and I hope 2013 repeats soon;)
One more question Steve. How do you measure open profit? Current minus buy price or current stop minus buy price?ReplyDelete
Open profit is measured based on current price minus buy price, but obviously I have moved up my stops in accordance with my rules. When it comes to position sizing for potential new trades, I do not include those open profits - only on cash equity at the time of entry.Delete
Thanks for the update Steve. It's indeed amazing how quickly the market can turn. And I'm glad you were able to maintain your discipline in the hard times, so you can profit now that things have improved. Well done sticking to your system and reaping the rewards!ReplyDelete