Trend following has been around for decades. And like all trading system, there’s no best one out there. But rather the one that suits your personality.
There are times certain trend trading system will outperform one another, and other times other systems will out perform.
Thus it is no surprise to see hedge funds employing a variety of trend following strategies to smooth out their equity curve.
Rayner
You can check out this guy’s website Au.Tra.Sy blog - Automated Trading System by Jez Liberty
He tracks the performance of a variety of trend following strategies.
Rayner
Awesome blog. So on it.
At all time highs all holders are profitable. There is little fear to drive them to sell.
There is no selling pressure on the holders of current positions in strong up trending markets so they tend not to sell.
With the majority sitting on their current positions in bull markets short sellers tend to be the primary ones selling.
Short sellers are forced to buy back at higher prices later creating buying pressure.
They only real pressure initially on a market at new all time highs is profit taking.
With the market holding key support levels stop losses are not hit so little selling pressure is coming on properly placed stops.
In bull markets people that got great entries are just letting winners run.
The pressure is on traders and investors that missed the move to chase and buy at higher levels when they under perform day after day.
Buyers are waiting to buy dips with pull backs at many levels so they can get in at the first opportunity. This creates support at levels.
All the central banks are on the side of the bulls. You can’t fight the FED.
Bull markets have no long term resistance levels.
When stocks are under accumulation it is a long process for them to start being distributed again.
Down trends have plenty of rallies.The short side of bull markets is not where the money is made.
The short side of bear markets is not even an easy path to profits much less the short side of bull markets.
What trades are people on at the moment I’m long on aud/nzd already up a fair bit but I’ll be holding it for a very long time. I’ll be adding to it as it climbs back to the 1.25 mark even if it takes a couple of years don’t care I’ll be buying another house from the trade lol.
I’m currently short Eurusd, audusd, gold
Long bund, gbpaud, nasdaq
Rayner
The Steve Burns list is great. He did a good interview with chat with traders, google it. Surprised though that the list did not include the compounding effect of bull trades. In currencies, the long/short difference is not really there because every trade is both a long and a short. That fact has pushed many out of currencies.
I am:
Long GBP/CAD
Long GBP/AUD
Long GBP/JPY
Short EUR/USD
Short EUR/JPY
Short EUR/GBP
Short AUD/JPY
Short AUD/NZD
Short AUD/USD
Short NZD/USD
Long USD/CAD
Long USD/CNH
Yeah you’re right long/short in currencies is alittle different from traditional instruments.
I tend to long the strongest ones and short the weakest ones, based on relative strength.
Rayner
What’s the longest you fellas have had a trade running mines only a little over a month.
It depends a lot on the time frame you entered your trade. If you enter off the 15mins chart, chances are it’s not going to last very long.
If you’re entering off the daily, it can last weeks or even months.
I usually enter off the 4 hour and can have trade holding on for months, if in the money. Like the recent usdjpy and crude oil trade.
Rayner
My EUR/USD short was entered Dec 17. My USD/CAD long was entered Jan 1. Most of my current positions are already 4 weeks old and I am managing my stop on a weekly chart.
But I only panned out to these longer time frames with the new year because I was experimenting by overtrading in 2014. The hard part is position sizing and I was playing with that by overtrading. I only closed 4 trades so far in February.
I don’t look at any intraday price action, I only look at highs and lows (I don’t care about closes). So I look at daily and weekly charts, nothing smaller.
Period of low volatility precedes period of high volatility, watching if Eurusd can make another move lower.
Rayner
Very nice I need to be better with holding for a lot longer it seems. My first really long one will be on aud/nzd I got in at 1.0350 which is almost the lowest it has ever been so I’ll stick with a loooong time and than add to it as it moves in my favour. Just thinking I’ll add a position at every cent till about 1.10 than let it go, what do you think.
Hey scotty,
When i scale into my positions, it’s because i have a setup that is present that allows me to know when to enter and when to exit.
By adding into a position every 10cents, isn’t wrong. But you need to know when to bail out if price goes against you. Also you should manage your risk as scaling in would increase your profits and amplify your losses as well.
Hope that helps!
Rayner
In this week’s analysis, I talk about how I use relative strength in my trading.
By identifying the right markets to trade, you will notice price moves much more in your favor and pullbacks tend to be shallower against you.
I hope you have enjoyed this week’s market analysis. As always, comments are welcomed and encouraged. Cheers!
Rayner
I see that some traders are against trend following. I think this is the best trading approach
Rayner, how do you define the levels at which you scale in?
-Adrian
You can scale in at pull backs or just at certain pip levels. Or once your 2 percent in profit put another 1 percent risk on so your always got 1 percent profit worst case scenario but you could end up with crap loads.
Hey Adrian,
Okay finally i got your name here. I only scale in when a valid setup presents itself.
E.g. if i trade breakout and shortly after being in the money, i get another breakout setup then i would look to scale in. And my subsequent scale in are smaller than 1R, usually 0.3R.
I don’t scale in if there’s no valid setup.
Rayner
