Direction is everything.

[meanreversion]

All this discussion has re-invigorated my interest in trading EUR/USD.

Um, did anyone mention EUR/USD at any stage? Your comment leaves me baffled, although it's not the first time

 

[forker]

You must have been enjoying these moves, seeing as you anticipated everything. Where is the $ going to next?

Don't get cocky meanreversion, I wasn't born yesterday.

 

[HowardCohodas]

Um, did anyone mention EUR/USD at any stage? Your comment leaves me baffled, although it's not the first time

Your continued bafflement of my posts must be a cultural thing. I refuse to conclude it is simply malice.

In reading the post title and many of the posts, the topic forms around "direction." Would you suggest that this idea is foreign to trading EUR/USD? Furthermore, my life in science, engineering and mathematics has frequently benefited from other's research in completely unrelated fields. Why should I consider trading studies any differently? In fact, some of what I've read in this thread has informed some of my ideas about my strategy. Why should I not remark on this?

 

[Prawnsandwich]

Price always gives clues and if you followed economic and political data you have the luxury of validation of what's happening. The problem with chart only traders in my experience is their lack of understanding in what is actually driving the markets. I recall recently one that didn't even know why the $ was devaluing. He thought he was the best thing since sliced bread. Since the recent events, he has given back all his profits from that trend.

Trend trading is easy, range trading is easy, identifying when a trend is over alludes most traders. In fact I would go as far as stating the transition from trend to range to reversal is where most traders struggle.

Don't get caught up in the common perceived knowledge that you can't identify Market changes and as a result, you cannot successfully take advantage of the change. For starters, you need to adjust your expectations when it does happen. You cannot simply apply trending strategies to ranges and although you can apply range strategies to trends you will probably get out with a fraction of the profit.

Someone mentioned catching a falling knife. I can personally vouch that such a strategy is very profitable indeed. You can employ it in both trending and ranging markets. But let me stress that every falling knife isn't worth trading. If you see huge pressure in the move then the odds are against the trade succeeding

RE Highlighted bit...whats wrong with easy ?...its not about about trying to be smarter than everyone and the market, picking tops and bottoms...its about making profits, and if this turns out to be easy by following a trend, then thats what you want as a trader - the easier the better...

 

[meanreversion]

I believe it was around august were the fed began to speak about printing more money and although it wasn't set in stone, the Market anticipated the move an the devaluation of the $ commenced. It didn't take a rocket scientist nor an economist to see that.

When the fed finally announced the details the Market had already price in. What was interesting though is the continuous release of USA data that suggested recovery... Many traders expected massive moves but again it didn't take a rocket scientist or an economist to see interest in selling more $. This was validated by a breakout an an almost immediate retraction with volume. I hope this makes sense...

Regarding trend trading. I disagree with your statement since I don't find them difficult to identify and take advantage of. Trends follow an easily identifiable stepping pattern.as for your low win% , I am not knowledgeable in your trading methods but I have a very good win rate when it comes to trends.

Well, I don't wish to labour the point, but you've outlined the three recent moves in the $ (the first big leg lower, the second smaller leg lower, then the sharp retracement) and each of these moves was fairly obvious, according to you. In addition, you've stated that it's easy to identify trends and make money from them.

So in summary, you're always making money from trends and reversals. Might I suggest there is an element of hubris in your post?

 

[meanreversion]

In reading the post title and many of the posts, the topic forms around "direction." Would you suggest that this idea is foreign to trading EUR/USD?

Right-o. You could just as easily have said "this post has reminded me of the need to go to the store" because, hey, you need to know the "direction" to get to the store, don't you?

You are the disingenuous master of the non sequitur (I'm sure you'll enjoy that mix of long word and Latin).

 

[forker]

Well, I don't wish to labour the point, but you've outlined the three recent moves in the $ (the first big leg lower, the second smaller leg lower, then the sharp retracement) and each of these moves was fairly obvious, according to you. In addition, you've stated that it's easy to identify trends and make money from them.

So in summary, you're always making money from trends and reversals. Might I suggest there is an element of hubris in your post?

Suggest all you like. I am not trying to pamper an ego. Would you prefer I said its difficult and almost impossible?

Don't think for a second that it has always been this way for me. I have been sown the road of failure that lasted many years. Persistence and ambition was the only thing that kept me from packing up shop.

I say its easy because after all those years things eventually fell in place for me. Trading has gone from difficult and frustrating to just like any job. So when I say it's easy, you could call it just another day at work.

 

[meanreversion]

My trend system gave money back from that last move in the $, annoyingly. These "bends at the end" of a trend always happen, I'm looking into incorporating drawdown limits into the code to first backtest and then maybe implement.

 

[forker]

My trend system gave money back from that last move in the $, annoyingly. These "bends at the end" of a trend always happen, I'm looking into incorporating drawdown limits into the code to first backtest and then maybe implement.

You using an automated system ?

 

[meanreversion]

It's a medium term trend system using futures which I operate manually (trades about 10 times a month, successful trades usually last between 1-2 months). I also have an automated shorter term system in FX, which trades 30-40 times a month - this one just requires monitoring for the most part. The short term system catches moves the longer term system doesn't, i.e. some of the recent $ rally.

Like any style of trading, it's always a work in progress.. I don't often make changes but I'm always on the lookout for potential improvements and/or other systems.

 

[forker]

It's a medium term trend system using futures which I operate manually (trades about 10 times a month, successful trades usually last between 1-2 months). I also have an automated shorter term system in FX, which trades 30-40 times a month - this one just requires monitoring for the most part. The short term system catches moves the longer term system doesn't, i.e. some of the recent $ rally.

Like any style of trading, it's always a work in progress.. I don't often make changes but I'm always on the lookout for potential improvements and/or other systems.

Perhaps you could introduce a concept of trend exhaustion. Price always gives clues. Typically there will be less rallies and ranges become dominant. One big clue I follow is false breakouts with strong price action against the prevailing trend. For me that is a sure sign of a change in sentiment.

I realise coding this type of stuff isn't easy.

Anyway, I wish you all the best in your journey

 

[meanreversion]

Perhaps you could introduce a concept of trend exhaustion. Price always gives clues. Typically there will be less rallies and ranges become dominant. One big clue I follow is false breakouts with strong price action against the prevailing trend. For me that is a sure sign of a change in sentiment.

I realise coding this type of stuff isn't easy.

Anyway, I wish you all the best in your journey

Yeah, there's probably something. The risk is that in adding too many bells and whistles, the system becomes overcomplicated and then prone to curve-fitting.. gotta avoid that. But (for example) take the sharp reversal in sugar on Thursday (-15% in one day).. I think that just falls into the category of "sh1t happens"!!

 

[DionysusToast]

Picking tops & bottoms is a touchy subject & I can only really vouch for day trading type activities.

Perhaps people think that picking a major reversal (which is relative to the timeframe) is the same as getting in a tick above the low and out a tick before the high. If this is possible, then it's certainly outside of what I'd ever be able to do.

I don't think anyone could pick every major reversal in the ES but it is possible to spot some of them occuring. It's an uncomfortable place to trade but it is ultimately the most rewarding. My opinion is breakouts are the worst place to trade as they need such wide stops but it's easy to pull the trigger as the market is currently moving in the direction of your trade.

So - if you don't trade breakouts, then you need to get your head around at least taking minor reversals, or trying to get as close to the point at which a retracement ends. To me, that means buying when other people are selling.

Is this what most people do - go long when the market is still moving down ? Either on a major reversal or retracement ? Or do most people wait for the retracement to start back in their direction before jumping in ?

 

[meanreversion]

I'm fairly indifferent to the type of system I trade. For sure, I've looked long and hard for something which successfully picks tops/bottoms, but what I always come up against is the exit. Let's say my system sold gold at 1425 (or whatever the recent high was), where is my take profit? It's now around 1365 - do I get out here or did I already buy back at 1400?

This goes back to the exits as being more important than the entries. If you do try to sell highs, this is countertrend trading so either you'll lose a lot of the time or you get out very quickly, but in that case you'll get nuked once in a while from it not having been the high.

I think it's human desire to want to sell highs, and I'd be the same, but it doesn't answer the question as to where you buy back.

 

[forker]

Picking tops & bottoms is a touchy subject & I can only really vouch for day trading type activities.

Perhaps people think that picking a major reversal (which is relative to the timeframe) is the same as getting in a tick above the low and out a tick before the high. If this is possible, then it's certainly outside of what I'd ever be able to do.

I don't think anyone could pick every major reversal in the ES but it is possible to spot some of them occuring. It's an uncomfortable place to trade but it is ultimately the most rewarding. My opinion is breakouts are the worst place to trade as they need such wide stops but it's easy to pull the trigger as the market is currently moving in the direction of your trade.

So - if you don't trade breakouts, then you need to get your head around at least taking minor reversals, or trying to get as close to the point at which a retracement ends. To me, that means buying when other people are selling.

Is this what most people do - go long when the market is still moving down ? Either on a major reversal or retracement ? Or do most people wait for the retracement to start back in their direction before jumping in ?

Attempting to get in a couple of ticks above a low or below a high isn't as hard as you think it is, although such trades by my experience are not a common occurrence. However, getting within a range of say 40 ticks is very common.

Even if you miss the high\low you often get other opportunities to get in. If opportunities only existed at the extremes it would be a rather difficult endeavour.

Regarding your breakout statement. It all depends on how you trade them. If you just throw yourself at a breakout you need to have some key points in place or else you just throwing money at a punt. Things such as well defined area of support or resistance. Price making higher lows or lower highs with the breakout geared towards the prevailing trend. If price action is clean and there are no data releases that could change sentiment then you have a good chance at success.

An alternative way and by far my main method of breakouts is entering on a pullback. Trends tend to step there way forward and test support or resistance often. This is by my experience the best way to trade trends and what's more, the strategy works wonders in range and reversals too. Sure there are other factors but at the end of the day a trend\range\reversal trade begins with the same entry method.

The power of support and resistance is without a shadow of doubt the most powerful and most common strategy used by Market movers and professional traders all over the world. Everyone sees it and maybe that's why it is so powerful

 

[wackypete2]

I find it's easier to trade all breakouts as false breakouts. Pick your entry and ride the price back to the breakout point. Be smart of course, use proper stops, etc.
Here's why:
-- false breakouts occur often therefore plenty of opportunities and reasonable chance of success
-- even true breakouts often retrace back to or near the breakout point before resuming

Peter

 

[FX Bandit]

Direction is everything , but finding direction isn't easy with failed trends and failed t/a set ups , late entries etc etc etc.wtf.80 % of trends fail.

ODDT, haven't you finished googling the answer yet?

http://www.trade2win.com/boards/gen...ntor-educating-unteachable-9.html#post1307684

 

[tomorton]

Sorry, but I strongly disagree with this statement. The very essence of trend following is NOT having an opinion on direction. My system has put me into several trades recently which I've thought were doomed to end in failure (e.g. short natural gas about two months ago), but which ended up making money.

If you are a trend follower, or trade breakouts, your opinion is that markets will be volatile. It is emphatically not an opinion on the market's direction.

Agree.

The mechanical trading strategies which I have done any development work on have to be traded irrespective of direction to make a decent return, as the trend reversals contribute an overweight proportion of the profits. These are Hikkake, 2C14X and Big Ben. Excluding the risk of counter-trend positions excludes the excess rewards of a reversal. Using these approaches, I also apply objectively defined profit targets, and pay no regard to volume or momentum indicators.

 

[JRP2891]

I don't think anyone could pick every major reversal in the ES but it is possible to spot some of them occuring. It's an uncomfortable place to trade but it is ultimately the most rewarding. My opinion is breakouts are the worst place to trade as they need such wide stops but it's easy to pull the trigger as the market is currently moving in the direction of your trade.

More unhelpful generalisation. Too many things wrong with this to know where to start.

 

[tomorton]

More unhelpful generalisation. Too many things wrong with this to know where to start.

Generalisation yes, but let's face it, when you enter an upwards break-out you are buying at the high, with the aim of selling even higher. It can be worked but it's a difficult thing for newbies, all their previous life experience tells them to buy something with a recently reduced price.