Why working on yourself is so important

We know we cannot change the past - what's done is done.

We also know that we don't know what will happen in the future - it doesn't exist, and anything (or anyone) can do something which may influence what will occur in the future.

So, what are we left with? We can only react and respond to the moment of now.

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.

Trading the downside - remaining faithful to the process

The last couple of months have been very positive as profitable downtrends have appeared in a number of stocks, both at home and abroad. Fortunately, I have been able to profit from some of these (while suffering small losses in a few others!), and while some which developed into downtrends have now triggered their exit signals, prices in others have remained in a downtrend.

This has potentially meant I may have been able to profit from the downwards move while those who trade longer-term trends have had to suffer an erosion of open profits, or even suffering losses, from a pullback or retracement within the context of a prevailing longer-term uptrend.

Coming up - new trade record

Regular readers of the blog will know that I kept track of all trades taken and the associated performance metrics covering the period July 2012 to April 2017, at which point I took a short break from the markets.

PDF copies of those records are available here.

This covered the good, the bad and the ugly of trend following. Sure, there were losing trades (lots of them!) and losing phases, but that is the nature of the markets, and typical of this type of approach to trading.

Despite a win rate of only 30%, the annualised returns equated to almost +75%, with an overall return of +470%.*

This can only be achieved by following the time-honoured principles of trading breakouts, cutting losses, letting your profits run and using good risk control.

As from 01 November, I will be starting a new record of all trades taken going forward, with all of the same metrics.

Having the freedom to switch direction - riding the bucking bronco

One of the skills an aspiring trend follower has to develop is being able to accept when he is wrong, and to switch directions if necessary. He attempts to ensure that his beliefs or opinions about what may (or may not) happen to a stock, index or instrument do not impact on his ability to follow the entry or exit signals presented to him.

Thoughts on what price action to focus on, timeframes and parameters

I've talked in the past here about how the indices are constructed, and given an argument as to why you may want to avoid following them 'parrot fashion'. It generated some interesting comments from readers, so it is worth a read.

Remember that, if you trade individual stocks, you are trading just that, and not the stock market as a whole. This point may well be anathema to a lot of people who trade using a 'top down theory' of analysis, and that's fine. I am simply putting forward a different point of view or belief.

What I learned from two Market Wizards about volatility

Given that the markets have taken off to the downside so far in 2016, readers may be wondering why I have not taken any positions so far this year.

Trend following - dead again???

I've noticed in the last few weeks that some articles are springing up stating that trend following is dead (again). Articles such as these appear every so often following a period of poor performance by the CTA community and other traders who utilise such a strategy.

The journey to trading success

It is a well known saying that 90% of traders fail, quite often within a few months of starting. They are seduced (quite often by glossy marketing) into thinking that traders can generate significant amounts of money with little or no background knowledge, and dream of becoming millionaires, quitting their 'real' day jobs, and a life a plush houses and fast cars. The reality is very different.

Another couple of nice trends

I've posted two more charts here (one long trade, one short trade) that once again show the value of riding a trend for absolute returns. Both gave valid signals as per the system rules when these price moves started, and if you were lucky enough to trade them, then congratulations!

Interesting times

Despite the markets' best efforts, the downtrend in the US indices appears intact. Over the last few days EUR/USD (chart below) has also joined the party and given a short signal. The key drivers or catalyst as to the price direction in an index, currency or a stock are an irrelevance to a true trend trader. Price is all that matters.

Trend following, Jesse Livermore and natural disasters

This is not the easiest topic to write about, but with the happenings in the US this week I feel compelled to write about trading and natural disasters.

Those of you who have read Reminiscences of a Stock Operator, Edwin Lefevre’s classic book reportedly based on Jesse Livermore, will know that ‘Larry Livingston’(Livermore) profited from shorting stocks immediately prior to the 1906 San Francisco earthquake. Initially the market held up, but Livermore was patient enough to sit in his positions, and the market finally succumbed to a sharp downdraft after a couple days.

Gulf Keystone Petroleum

I tried this particular stock from the long side back in July, which I was stopped out of pretty quick. After getting a signal just over a week ago I opened a short position which is now in profit. Again, a trend follower should be comfortable in trading in both directions. Providing there is a trend signal given, then that is the green light to enter a trade and see what occurs. And if we are wrong, then our risk control will take us out of the position with minimal damage to our portfolio.

Google - another example of following your exit signals

In my previous post I referred to the circuit breakers and trading halts put in place after Black Monday. By coincidence, we had a trading halt called in US giant Google's stock yesterday after it's latest earnings report was released into the public domain several hours too early, and which lead to a sharp plunge of near 10% in a matter of minutes.

A change of trend

The markets are now giving conflicting signals, following the price action over the last few weeks. The Nasdaq appears to be the weakest index, with the most pronounced downtrend signal given by any major index early last week. The Dow went from hitting new intra-day highs to giving a short signal in the space of four sessions. The strongest index remains the FTSE, which remains some way off triggering such a signal.

Some nice recent trends

Here are some recent trends in stocks which have done very well. I hasten to add that I have not trade any of these stocks, however they all met the entry criteria when the current profitable trends started. There are plenty of potential signals on almost any given day, in both direction - some trends work out better than others, but as we trade a number of positions at any time, up to our pre-determined position limits, there's a good chance we can (and do!) catch moves of a similar magnitude.

Training and mentoring for non-UK residents

When I initially started offering training and mentoring services, the intention was to solely provide this for people in the UK. As it turns out, due to the popularity of the blog and the general Twitter feed, I have been able to correspond with people in Australia, the US, Singapore and Hong Kong as well as other parts of Europe.

The markets have been telling us...

Not a lot to say here today. The trend has been up for a while in the indices and in the long positions I currently hold, and I've simply followed those trends. Nothing much else to do except trail my stops per the system.

No trying to be 'smart', no referring to overbought (or oversold) indicators, no trying to time entries and exits in positions. No intellect required, no studying of economic or earnings reports - just doing what any trend follower would do - follow the trend of the price.

...And some you lose

Following on from my previous post, the strong move up caused me to be stopped out of one of my short positions, which had been going nicely in my favour.

Some you win...

The only way you can implement a proper trading strategy in the markets is to be fully comfortable in both the method of selecting entries and exits, as well the notion that you can accept and embrace risking your capital.