Category: Educational

 

Is common sense allowed in trading?

The answer to this question is ‘no’ – if you’ve been trained in some system of rules, which you’re meant to follow rigidly.  The beauty of trend-following methods, is that it allows for a degree of common sense.  Indicators are there to help paint a picture. Trend followers are not chained by indicators or rules. There are some traders who cannot trade well without a set of rigid rules. It is not the purpose ofRead More

Expecting to lose – the sleep test

Nobody likes to lose – I can safely say. It’s been hardwired in us as part of the survival instinct, that we need to win. Financial trading is a very different ‘game’. You have to expect to lose, in order to win. This is not to say that we have to like losing. Instead we need to get close to the idea that losing is not actually losing. Now that may seem quite crazy. ButRead More

Trends, micro-trends and time frames

Important in trend-following is to know your time frame and which trend you’re following. It’s easy to forget. Sometimes a trader may start off on a 4H time frame and then see and opportunity on a 1D time frame. The initial acceptable loss (the stop-loss) would have been determined on the 4H. Switching to a higher time frame and keeping the same stop-loss  as a lower one is not a good idea. Why? It meansRead More

How following a trend can work

The chart below shows an ideal situation. In this example the trend was entered quite late. Caution: ideal does not mean representative of all trades. To learn more study the chart, where it is accepted that a very high percentage of setups will fail/lose. This is a game about losing but it’s not for losers! If the trend was spotted in time it could have been followed for a 1425 point gain over the courseRead More

What is and is not prediction?

The nature of what ‘prediction’ means came up a couple days ago, in one of my online discussions. The words that caused me to look into this were, “What’s harder to predict? 1 pip movement or 1000 pip movement?” – in the course an exchange of ideas on different methods. This question was partly rhetorical and somewhat argumentative (not that we were having an argument). It came from a seasoned trader who had on several occasions before claimed to predictRead More

Comparison of trend following with non-trend following trade scenarios.

Trend following trades are worlds apart from the usual trading you’d find out there on the net. This is about the big money. The big boys do this cuz they want the big money! They’re not interested in jumping in and out of markets with a few harmonic trades here and there. They want the full monty. So – what’s the matter with you?! Why can’t you do it? Well – you don’t have to.Read More

More on trend following

Trend following is where the money really is! Why? Because you’re not bobbing in and out of the markets trying to catch a few quid. Instead you’re finding established trends to ride for quite a long way. There are several ways to catch trends. See: Trading with Guppy and  Revisiting the Williams Vix Fix . The technique in the chart below is based mainly on using Aroon and RSI indicators. This seems more efficient and less energy/timeRead More

Who the devil is Aroon?

Aroon is not a ‘who’. Aroon is an indicator of momentum in the markets. But it does more than show momentum. It is about time-momentum which is a novel and under-appreicated concept. The Aroon was developed by Tushar Chande  (PhD in Engineering and MBA at the time). In 1995 Chande first published his ideas on the Aroon, in Stocks & Commodities – a most respected journal contributed to by people of exceptional qualifications and trading experience.Read More

DAX v EURO correlation

Correlation is about how certain things are related. Some instruments are inversely correlated i.e. if price goes up on one, then price tends to go down on another. Positive correlation  means they move in the same direction. It is almost never the case that there is perfect correlation between two instruments. Interestingly the DAX (GER30) which is the German stock market index, has a broad inverse correlation with the EURUSD currency pair, especially on higherRead More

Support and resistance again!!

Today I came across another classic example of support and resistance. I often review things that I had already learned so as to etch in my brain the importance of the concepts. The chart below explains more.