This is an awesome period for trend followers. You have price making multi year highs and lows across the markets and most trend followers would have already been on board.
This week I’ll be looking for trading opportunities in commodities, S&P and British pound.
Rayner
Hi Rayner, you said: "2) Breakouts - Turtle traders traded the 55 day breakout with many hedge funds using similar entry approach."
Reply:yes you are right, but the funny thing about breakouts, or using any indicator is, that you have to wait a long time. In the hourly chart for example, you can wait for 8 days until PA (price action) finally touches the top or bottom of the bolinger band. Or it finally bounces on a moving average after 8 days. The problem with this is, if it is 8 days later, and you wake up in the morning then maybe you just missed it and you will experience that 1 hour ago it bounced and that you’re too late to open the trade now. Do you understand?
Most people say that EA’s are useless. But in this case, would anyone if that person could program MQL4, use an EA that opens a trade when it touches/bounces on the bolinger band or Moving Average? If you could program and EA, then would you program this? I am not into programming MQL4, but I should learn appearantly as to not miss out opportunities in the market. What is your opinion?
Hi Michael,
I don’t trade off the 1 hour charts, usually 4 hours and above for me.
I place my orders way ahead of time, either limit or stop orders… so i seldom miss my trades actually.
The trades that i do miss is usually resulted from me being forgetting to place my orders.
I don’t use EA so i can’t comment on it.
Rayner
Hi Rayner,
I’m going to go right back to your original post and challenge you on a technicality . . .
Dunn Capital and Chesapeake both employ very different strategies. Are they really both trend followers? Chesapeake essentially trades “breakouts”, where Dunn is always present in every market they trade (either long or short, with variable position size), and quite likely employ some form of “relative strength” approach to position sizing.
Is “trend following” really a meaningful way to categorize these traders? What does the term actually imply? All traders hope to be “long a market that is going up”, even counter trend and mean reversion traders, who hope to enter close to a turning point . . . The idea of “limited downside, unlimited upside” is really the concept of “optionality” exploited by the likes of Nassim Taleb (who might be a trend follower, but certainly doesn’t identify himself as such).
I’m honestly not questioning the usefulness of your thread, but is “trend following” really a useful term?
Kind regards,
Nick
What steps do you recommend for a new comer to get started in trend following? thank you 
Trend following isn’t an exact trading system per se.
Rather it holds a certain set of principles that all trend followers adopt.
No 2 traders will ever trade exactly the same, some may use a filter for breakouts, some wait for a close for breakouts, some trade pull backs etc… all these are simply entries.
And entry is just a small part of trend following. There’s risk management, exits, position sizing, markets traded to consider as well.
And again no 2 traders will have the exact same parameters in all these factors.
But one thing that is common is they have a similar set of principles that they apply.
Buy high sell higher
Sell low cover higher
Trade all markets
Know when to exit when wrong
Know when to exit when right
And yes both Bill Dunn and Jerry Parker are trend followers, and they all belong to the managed futures industry. You can follow Jerry Parker on twitter @rjparkerjr09 he talks about trend following regularly.
Bill Dunn: Trend Following Trader | Trend Following Trading Systems & Research from Michael Covel
If you want more information on trend following, you can check out trend following by michael covel, following the trend by andreas clenow, the complete turtle trader by michael covel
And trend following is similar to going long call option, limited downside and unlimited upside.
Hope that helps!
Rayner
Trend following is any implementation that follows price trends after they are measurable in some way. It doesn’t matter how they are measured or what the entry and exit criteria are, following price trends is trend following. Dunn, Parker, and Scot Billington each have very different implementations, but they all follow trends and avoid prediction and counter-trend trading.
-Adrian
Hi coughs,
I would encourage you to read trend following, the complete turtle traders by michael covel and following the trend by andreas clenow.
For a comprehensive reading list, check out this post here.
Rayner
Look at the eurusd 4 hour chart, crazy right?
It’s much more orderly on the daily chart
Always look at the big picture when in doubt
Rayner
This week’s market analysis…
I hope you have enjoyed this week’s market analysis. As always, comments are welcomed and encouraged. Cheers!
Rayner
Hi Rayner, Yes, these are great times. I have developed a trend-following system that has made about 14% per year on average for over 50 years in forward testing. It was about flat in 2014, but it made about 40% in 2013 and is now up about 14% from its last signal on 10/24/14.
I’d like to tell others about it to give them some ideas, because I haven’t found much published that work the way it does and would be interested in what others have to say about it. But I don’t want to reveal the details of parts that I consider proprietary.
I have an article about it published on another web site, which may contain some advertising, so I’m not sure that I can post a link here. I myself have nothing for sale. If it’s ok to post the link here I will. Here’s a chart of its equity curve from 1960 through 9/26/14.
The white line is my method’s equity curve, the green line is the S&P 500, and the yellow line is the Value Line Geometric until 1979 and Russell 2000 after that (the method trades the yellow line).
Hi Frank,
Yes please feel free to share, i’m sure all of us would be interested to learn as well.
Cheers! 
Rayner
Thanks, Rayner, I’m not allowed to include a link. So I will have to disguise it:
hypertext transfer protocol colon slash slash six figure investing (all one word) dot com slash 2013 slash 09 slash modified dash davis dash method slash
Or, one can just Google six figure investing mdm
In the article the chart can be magnified by clicking on it.
Regards,
Frank
Rayner,
you suggest 2 * ATR stop …but this is a quite big stop for me …Is it possible to use small sized stop loss than this ?
Need help
Hi godzilla,
No i won’t suggest using a smaller size stop. What you can do is to reduce your position size instead.
Rayner
Hey Frank,
Thanks for sharing i’ll check it out!
Cheers!
Rayner
godzilla, Larry Williams has demonstrated that in many instances, increasing the size of the stop will improve the performance of a method. Some of the best performing systems have no stops per se, as they are always in the market, either long or short. I know from experience that large stops are hard to handle. But take a look at max drawdown… often increasing the stop size will reduce max drawdown.
So very true. Although a tight stop can decrease the risk of a given trade, it can increase the risk of a series of trades.
-Adrian
For those who haven’t gone to my article, I think there’s a message on stops. I’m always in, either long or short, and my potential loss on any trade is in the 4% range (“OUCH!”, you may say). But… I win on 55% of all trades, and the average win is about 4 times the average loss, which is about 2.7%. And this is on a forward tested method, not an optimized back test. I believe that these stats are better than what have been reported for the Turtles’ methods.
Another way to look at it: It’s like flipping a coin where you make $4 on heads and lose $1 on tails. How many coins like that do you want to flip?? I’ve flipped a ton of them and am very happy.
Thanks Rayner,
will check this out .
