Often I will take my cue from the strength of the trend as indicated by price action, I don’t think there can be a hard and fast rule. At times when pyramid trades are coming frequently and close together I’m happier to ride the trend than to break off and bank profits. Other traders might take a different view or they might take the more bold or the more cautious line. I couldn’t say any one of them would be wrong and I certainly don’t say unless they do it one specific way they would not be doing it right.
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Yes, I understand the dilemma - when the trend appears to be too strong there is always that possibility that it will retrace and if the trend is weakening, it maybe better to close and move on.
This is where I think your MN analysis comes into play. That is, if the market is behaving normally, I would not close and wait for a possible pyramid but is the MN score is low and going down, it’s time to be careful and perhaps close and wait for re-entry.
What do you think?
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Also, for me personally, closing on a strong trend would be less appealing as I’m not that experienced and would not want to overtrade.
At the moment the market is calm, but a few weeks ago it was not and when you got on the wrong train you could lose everything, on days like the Fed it is worth waiting and not opening positions early, better not to make money than to lose.
Hi Tommor
How is your Dow trade progressing?
Did you pyramid the second time on 12/7 at around 35,000 or did you exit?
I would have pyramided but it seems exiting would have been better (in hindsight).
I exited both the initial long and the +0.5r pyramid but it wasn’t a great outcome. I have a new entry order set. Though the markets seem unsure what direction they should take its almost always worth having a Dow buy order somewhere.
Why? You would have made 1r profit, I think.
Yes, I had it set notionally at 35025 on eod 13/7 and on my chart it would have been executed on 14/7.
Another week’s results are ready now, and what an extraordinary week it turned out to be. You can post up your own ideas about the reasons behind the current market mood and activity if you’d like to - but here are the numbers -
A trend-following week -
Overall the week ended with a trend-following positive score of 56%. This is clearly in the green territory and we haven’t had such a high positive score since 7th May.
But -
Weekly scores are flip-flopping -
The middle 3 weeks of June were all negative but after that we have gone positive, negative and now positive again.
Powerful daily scores -
The daily scores his week tell their own story. We had 4 positive days so its not a surprise that the week ended positive. Two of the positive days scored over 70%, first time I’ve seen that in the last 15 weeks. The fact that we had two 70%-plus days in the same week is also unique in that time period.
So -
Why wasn’t the weekly score better?
Wednesday - Wednesday’s score was just 18%: the only time a daily score was lower was 15 weeks ago.
So this week we’ve had extremely positive and extremely negative indications for trend-following.
Who knows what the hell is going on?
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Hi Tommor!
Yeah, you made me chuckle, alright.
But seriously… you’re absolutely right. The market definitely has been throwing us some extremes. We do need to see some details. But when you group up the currencies and see what the individuals are doing, it makes sense.
I agree with everything you said. But I think it all started around the end of June. In fact, we can look back on your post here and remember our conversation about it all. It’s just continuing. Which is something.
This is what I have for this past week.
At the bottom is my total results. Green is a trended (normal) day, red is not. And you can see that we both agree on the 4 days this week was normal. But Wednesday…
Yeah, Wednesday. That day was something. You know why? Cause of the NZD.
They had their interest rate decision that day (Asia session). And I heard that they came out of it talking about a very possible interest rate hike coming, later on this year! And you know how that’ll move the market more than any other fundamental reason.
(BTW…Maybe we might differ in what we consider the start of a day and the end. I tally all my daily numbers to start and end at the NY close. It’s 5pm my time. Which is about 10pm your time (London), I think. Right? Is that your daily start and end? Cause I know some traders (brokers) like to start the day when your sun comes up. I used to do that quite some time ago. Cause London is the financial capital of the world, and I wanted to arrange my numbers according to that. But I feel that NY maybe more popular. So I changed along the way.)
Anyway.
The NZD started that day with a bang. And then they just caught fire through each of the sessions that followed. You should be able to see that there wasn’t any other currency that really moved much. Only them. But what we need to realize is that the NZD’s prevailing trend is for low. And why were at it, I’ll just put up what I believe is what the prevailing trend for each currency is.
You should be able to see that we haven’t had any changes to what their trajectories are. The Comm currencies are all trending low.
But then the next day, Thurs, all the Comms went completely counter trended (opposite). So you should be able to see why the line up for Thurs came in quite trending. All except the JPY followed their path.
But generally speaking, I think the NZD was what made the biggest difference this week. They really moved. Against the trend on Wed. With the trend on Thurs. And against the trend on Fri (although the AUD and the CAD both went contrary to that and went with their respective trends, which is low, on that Fri).
Here’s a birds eye view of this year.
A line for each month. And the total at the end.
Green for trending (normal). Red for counter trending (not normal).
Below each Fri is that weeks total.
This is the narrative of the crazy dynamics that have been playing out.
Just look at these %'s as relative. If you compare them, then you’ll realize.
- The end of Jun it started. Remember that full counter trended week (every day red)?
- The next week follows with some big trending days (4 in a row).
- Then that Friday (first one in Jul) comes out with a HUGE counter trended day. That was on a NFP Friday, mind you.
- Then again, 4 straight trending days. But ending the week tranquil.
- And this past week (just like you said) went normal except for Wed.
So yeah Tommor, very interesting I think also.
I do have to say that I am very surprised that we haven’t seen any real trend changes, yet. I thought we would have this month so far, but no. A lot of volatility, yes. Big days. But not enough of them to change any respective prevailing trends.
It always seems to go back to what the trends are (hence the green days).
I will be telling you, Tommor, when I think any prevailing trends are taking place.
Actually, I think we might be getting close with the JPY. They’ve been on such a long bear trend. And that’s probably why it’s taking so long for it to happen.
We need a little more time, though. Nothing convincing yet.
Well, that’s what I think.
Mike
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The forex markets flip-flop again - a negative week has just completed, very anti-trending with a score of only 40%. This is a very low score, only the third time the score has been this low in the last 16 weeks.
I have a couple of forex positions open - these have trends which are strong enough it heir own rights but against the general market confused and hesitant sentiments I don’t expect them to make great advances.
This is still a good time for bold use of cautious tactics.
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Another normality flip-flop week. Score of 55%, so somewhat positive. But the last 6 weeks have alternated between positive and negative, so we’re not in a positive market frame at all. In fact 3 of the 5 sessions this week ran negative, but Friday put in an exceptionally high normality score of 79%. This performance level has only been reached once before, in late April: a score of 80 or above has not yet been printed.
Caution!
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Hi Tommor
When we have a high market normality score that indicates that more than 50% of pairs are closing with the trend. However, to open a position we are first looking for a pullback.
Isn’t that a contradiction of the MN criteria?
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Yes, on a small scale it is a counter-trend move. And I’m not saying forex trend-following trades can’t be made during flip-flopping MN, just that cautious tactics will re-pay the trader. But caution is a relative thing - bold traders will carry on regardless: cautious traders will adapt their tactics: the very-cautious traders will stay in cash.
But the pull-backs should not be sufficient to change a pair’s trend - the trend indicator I use for MN is simply the sequence of the 20 and 50EMA’s,. So if the 20 is above the 50 that’s an uptrend, if its below the 50 that’s a downtrend. It would be a severe pull-back to push the 20 to the other side of the 50EMA. Meanwhile for selecting a pair to trade, additional criteria should be applied to select the best pair to get into.
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Hi Tommor
Yesterday was a large drop in MN, from 39% to 18%, according to my calculations.
I agree, my charts scored yesterday as 21%, so an extremely anti-trend day. Only the 6th time in the last 89 days we’ve had a score this low. This makes 4 consecutive negative days this week, the aggregated score coming in so low that we’re now mathematically guaranteed a negative weekly final score.
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I only have one active order on AUDCHF but it doesn’t look like it’s going to be filled.
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Over the last week the only AUD or NZD pair to have moved with-trend is ironically AUD/NZD.
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The end of another week and Friday couldn’t even manage a positive daily score - just 50%. The negative weekly outcome continued the flip-flop positive-negative weekly scores alternation. The weekly score was just 38%, the lowest weekly result I’ve logged in the last 18 weeks.
Of course, its possible to see this week’s anti-trend score as an extreme. And forex in particular is prone to mean-reversion. Many pair prices have strayed way up/down away from their trend-following courses. If prices revert back towards the respective trend courses, this could present some brilliant opportunities as established trends resume.
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Hi Tommor.
I definitely agree. Of course my data comes out the same as yours, as always.
First 4 days negative.
NFP Friday came out positive trend flowing. But yeah, negative week. For me this compares to that last week in June. But that was 5 non trending days in a row.
But look at what happened after that. We went trend following (normal) for most of July that followed. So, maybe the trend followers should keep this in mind.
Mike
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