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.2016-05-10_01-51-56_big_boys_small_boys

So – what’s the matter with you?! Why can’t you do it? Well – you don’t have to. You could comfortably for you, continue to play support and resistance levels, fibonacci levels, mess around with RSIs and harmonic patterns. That’s fine – free choice is there for everyone. This is not set out to interfere with you or your preferred trading plan/method/strategy.

The trading strategy in the infographic combines time-momentum assessments based on the Aroon  with price-momentum using the RSI, in order to select optimal entry and exit points.

If you want to up your game to where the big boys are, you might learn a bit more. But you don’t have to!

The table below compares some practical differences. This is not to say there aren’t exceptions to that below. Of course not. In trading there are lots of things that vary. We’ve put up the big and broad picture.

Comparator Trend following Non-Trend following
Price-momentum Not highly dependent Highly dependent.
Time-momentum Quite dependent Not dependent.
Losses Fixed at outset but vary with following the trend Fixed for most of the time but can vary depending on method.
Gains High gain if a minority of trends are successfully followed. Significant but limited by fixed targets.
Reward-Risk ratios High at outset but falls when trend is followed with trailing stop. RR ratios on successful trades could be easily 10:1 or more Mostly fixed RR ratio. RR ratios are usually no larger than 5:1.
Targets None Definite
Take profits Take whenever you think it is right (based on your criteria and assessment) Depend heavily on targets.
Re-entry Can happen if trend temporarily stops and then restarts. Not usually possible.
Indicators One or more can be used together One or more can be used together
Win-loss ratios Not very meaningful because winning trades can be enormously high in eventual profit value. A smaller percentage of successful trades are needed for profitability. Important – as profitability is usually not expected with a W/L ratio of less than 40/60 (though there may be exceptions).

The information provided herein is opinion only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of investment. You are responsible for your own due diligence. To summarise, we do not provide investment advice, nor do we make any claims or promises that any information here will lead to a profit, loss, or any other result. All materials are for educational purposes only. We are clear in our SYP.


What is technical analysis?

When I first started off learning TA, I thought it was ‘technical’. There is nothingRead More

What is money?

I’ve explored money before. Some say, “Everybody knows what money is.. so why ask stupidRead More

  • Bonds – what they are and their importance
  • Conversation with a failed trader
  • Enquiry from a new trader