On defining a trend, interpreting volatility and when to go fishing

Jesse Livermore aboard the Anita Venetian

"Your definition of trend is the smoothing method you use. The methods you use to define trend are entirely up to you, so you get to define trend any way you wish; everyone may have a different idea of "the" trend." - Ed Seykota.

Focus on your own trading and the trends you are looking to profit from

We know that markets can move from a trending to non-trending state, or vice versa, at any time. But as Ed Seykota says, there is no such thing as 'the' trend. 

Also, different traders will have different interpretations about the type of trend they are looking for - one person's long-term trend may be another person's short-term trend.

The important point here is that how anyone else defines a trend is irrelevant to your own trading and performance.

Don't think you know better than your rules

"If you take emotion - would be, could be, should be - out of it, and look at what is, and quantify it, I think you have a big advantage over most human beings." - John W Henry

In trading, hindsight can be a not-so wonderful thing. Your stop gets hit, kicking you out of a trade for a small profit. All of a sudden, price takes off in the direction you were looking to profit from, leaving you on the sidelines.

Take it from me. If it's happened once, it will happen a thousand times.

Is this type of event frustrating? Sure.

How do you define a trend?

The past has happened. The future doesn't exist.

Therefore, we can only react and respond to what is happening in the moment of now.

So, for traders the question is, what is price doing now?

The tricky bit is how you define "what is price doing now".

Some thoughts on defining market states

When people talk about the four market states, typically they refer to these as trending, non-trending, stable (low volatility) and volatile.

However, what you need to consider is there is no definitive answer to how you identify each state, and the answer may differ from trader to trader.

Developing your level of competence - which step are you on?

In trading, as in any walk of life, it takes plenty of experience to evolve from being unconsciously incompetent to unconsciously competent in what you are doing.

The 90:10 paradox

It is generally estimated at that 90% of all new traders lose their capital within a year.

In my experience, 90% of traders concentrate their efforts on their stock selection methods, rather than either their risk management or dealing with any psychological issues.

Coincidence?