Trading BS: part 1

[shadowninja]

Ok we've had quite a few cliches in the previous thread. Let's discuss these three, first:

"The trend is your friend."

"Risk 3% each trade."

"If you fail to plan you plan to fail."

Please state which you're referring to at the start of your reply.

It would be helpful if you could write about your experiences rather than quoting from books; we've all read the literature and know what the general consensus is. In this thread, perhaps we can expose any cliches for the BS phrases that they are, or, indeed, confirm that they are the best approaches.

If you think of any more cliches, please submit them here: http://www.trade2win.com/boards/general-trading-chat/45678-trading-cliches-bs.html

If this proves to be of use, I'll pick some more cliches to discuss in part 2.

 

[shadowninja]

"The trend is your friend."

For any chosen time frame that I work in, I always find that if I try to guess the reversal price when a trend has established itself, more often than not, I lose money. When I buy in the direction of the trend, entering after pullbacks, I seem to generally* be able to make at least twice my stop loss size. (Whenever I forget this, I give my money away.)

*-60% of the time, maybe.

 

[jaygo]

"If you fail to plan you plan to fail."

If you enter a trade without a set stoploss and a planned target/criteria that indicates you need to exit the trade eg double bottom, failed breakout ect. then you are doomed and at the mercy of your emotions, which always leads to a frustrating and stressful trade.

 

[sebby2468]

I tend to always go with the trend,why run against the wind when you can have it against your back!

I have also found that you get a lot bigger wins trading with the trend,Ive done well in the past trading oil this way

 

[Splitlink]

I tend to always go with the trend,why run against the wind when you can have it against your back!

I have also found that you get a lot bigger wins trading with the trend,Ive done well in the past trading oil this way

Many have not got this, yet. Apart from being more profitable, it's more peaceful, too. The drawback is that it is so uncomplicated that it does not require much explanation, which is a problem for the experts.

Split

 

[Chorlton]

"Risk 3% each trade."

IMO This maybe a useful guideline for anyone new to Trading but for those who already have experience I would suggest that how much one risks per trade is highly dependant on the output of ones own particular system.

If one has developed a system which produces a high win rate coupled with a low DD, then (unless one wants to use leverage) increasing the risk per trade will only improve the profitability of a system.

However, for my own trading, I would never exceed 1.5% and normally try to limit my risk to around 1%. Anymore than that and I become uncomfortable......

Chorlton

 

[Splitlink]

As long as the average gain is more than 3% per trade it will be OK but not if less. The gain is what the trader can only figure out for himself and a lot of new guys kid themselves that, sooner or later, it will result in a winner that will wipe out the losses.

That's something to work towards but, until it does, it is pie in the sky.

I've always been a shortish stoploss trader but, comparatively recently, I've started to extend my stops (reading to many posts on T2W ) I'm like Charlton, here, I feel distinctly uncomfortable when it gets too much. It is something averse to my character.

Split

 

[montmorencyt2w]

"The Trend is your friend" - well of course it is in one sense, and trading against the trend is a risky business at best.


However, my (limited) experience was that (when I was even less experienced), I luckily managed to get into a few obviously trending markets, and made a little money quite easily, which lulled me into a false sense of security. The trend can be a very fickle friend.

The other thing is to know if you really are in a trend or not, to know at what point in the trend you are entering the market, and at what point in the trend do you want to exit. The obvious answers are not always necessarily the best ones, and indeed, not always all that obvious, at the time. We can all be perfect traders in hindsight.

 

[jfgao]

The trend is your friend, until the bend at the end.

To this I say: screw you friend, I'd rather meet with the bend! The former will condescend, whereas the latter ensures that you comprehend.

 

[JTrader]

Trading cliches - this has been done b4.