What would Old Partridge do?

The markets have continued their uptrend with the announcement of the agreement reached in Europe overnight.

The danger now is what to do next. Depending on their chosen timeframe, hardened trend followers will simply sit 'on their hands' and do nothing with their existing positions except update their stops in accordance with their rules. Other traders will be cashing in on their profits on the view that the markets are overbought, and don't wish to lose some of their profits - a classic example of cutting your profits short.

Onwards and upwards?

Despite a nasty day on Monday, the markets have held up well, and indeed tonight the Dow went into positive territory for the week. The major indices would appear to have consolidated their move up off the prior lows, and are now primed to make further advances.

As mentioned last week, I am now looking for additional long positions to those opened last week, in accordance with the trend in the general indices, although I was wary in the earlier part of the week following the sharp falls on Monday. Interesting though that one of my remaining short positions has actually broken down again to new lows, thereby showing relative weakness compared to the general market.

A change of direction

The markets have spoken this week, and the general indices have performed an about turn from the drop starting in early August, and are signalling a new uptrend.

The saying 'the trend is your friend, until the end when it bends' has been no more apt than during the last couple of weeks, as short positions have been exited, and starting to be replaced by new long positions (posted in real time in the members area).

It is a trend followers job not to question why a trend has changed, merely to act upon it. Changes in trend always lead to a) a loss of open profits, at best, or b) losses taken exiting losing positions as stops have been hit.

Trend following is purely an unemotional trading activity - the system rules are designed to get you in and out of your positions. Combined with appropriate risk management, this means you can absorb any losses, keeping you in the game and be able to move onto new trends, new possibilities. Who knows, this new trend may take off and propel us to new highs for the year or even more...

A big winner

Using the principles discussed in my e-book, one of the subscribers in the members area had a big winner today as a result of being in a short position in Mothercare, which fell over 40% on a profits warning. Although this can be seen to be an unexpected windfall, the signs have been there for a while with a nice downtrend being in place.

If you want to be able to identify and profit from trades such as these, then sign up for the members area, or grab yourself a copy of my e-book, The Trading Triangle.