Dump it Here

[Skate]

Trend Indicators
A few simple trend indicators are all you need to see when to enter a position. Entries during trends require almost no brain cells. Once we have our entry, the problem becomes one of exit strategy & money management. A simple 10-period moving average is all you need on a chart to see a trend.

10-period SMA
If the closing price is above the 10-period simple moving average it’s in an up-trend. When the close is below the 10-period moving average it’s in a down-trend. Indicators don't provide buy or sell signals - their primary function is to determine whether the timing for the entry or exit is optimal & they are essentially the main drivers in coordinating the trading strategy.

Some indicators
(ATR) is a volatility indicator, combined with a momentum indicator (ROC) tells a powerful story. A Commodity Channel Index (CCI) is a momentum-based oscillator used to determine overbought or oversold conditions but this indicator is best used in conjunction with additional indicators. The Rate-of-Change (ROC) indicator is a simple Momentum indicator (my favourite indicator) & I use the ROC indicator in every strategy that I code to confirm the increasing momentum of a trend. The exponential moving average (EMA) is just one variety of moving averages to choose from. The (EMA) used by itself has no special powers but use it in combination with others turns the (EMA) into a superhero.

More to follow.

Skate.

 

[Skate]

What drives a trend?
"Volatility & Volume" are the real driver of a trend - meaning we enter a trend on volatility & volume - getting off when the trend turns. There are so many indicators that measure both of these. It pays to do your own research to find indicators that will work for you. Getting into a trend is not that difficult using an indicator, using two is sometimes better. Getting out of a trend & timing the exit is a little more complex.

Exit strategy
You should develop an exit strategy that works separately from the entry indicator. I use a stale exit & a trailing stop. A stale exit can be as simple as "if the position that hasn’t made a new high for 5-periods since the entry (exit)". Exit strategies are too numerous to discuss in a general post. However, there is no such thing as the "best" exit. There are exits that work for all styles of trading. (Finding them is the hard part)

More to follow.

Skate.

 

[Skate]

Exits need to fit your personality more than entries
I've rephrased that "exits are more important than the entry because it's a contentious issue". What I mean by "exits need to fit your personality" is that too many traders look at what makes the most money when backtesting. Doing it this way is "arse around". Why? because traders quickly realise that they can't trade the strategy because of the drawdowns, trade frequency, or other issues that cause them grief.

It's all about picking an exit strategy that you are comfortable with
Look at the exit on a chart. If you feel good about what you are seeing, you're in business. One of the first steps in becoming a good trader is understanding that you don't, shouldn't & can't maximise everything. So put that idea behind you.

Doing things, the hard way
When starting out most beginners will try everything & anything. The “Dump it here” thread tries to explain how trading works, while conditioning you "how to think" when you are experiencing mental stress (when a position or portfolio is under pressure). My advice is to keep every part of your trading strategy & plan as simple as it can be.

Skate.

 

[Skate]

Possible versus Probable
At times we have all said, “it’s possible but unlikely”. It’s another way of saying “it’s possible but not very probable”.

Trend trading picks a lot of duds
When taking a position, we tend to think in "probabilities", but rarely think of the "possibility" the trade will be another loser.

As a trend follower, you get used to having a lot of losing trades
Keeping those losers small so the less frequent winners outweigh them is the secret of trend trading. Every position we take it’s “possible” they become a big winner that pays for all the little losers, but it’s “probable” it will be just another loser. That’s a tough mindset for most people to deal with. Once you accept what's "possible", your success becomes more "probable".

Skate.

 

[Skate]

Consecutive down days
When there are a few consecutive down days, traders think in "possibilities" that what happens next can get ugly. Fear of losing money is what drives the market down. It's most "probable" that the markets will go back up. As humans, we are conditioned to think in terms of "doom & gloom" for survival. (That's not well suited for trading)

There are always two sides when handling down days
(1) Panic & sell or (2) hold & hope for the best.

But there is a third option
(3) Trade your plan.

Preserving capital
New traders know little how to preserve profits as they watch their profits quickly disappear, hoping that prices go back up again. Some can't sell because of how well the market has been going these last two weeks, so they hold on, & prices continue to fall selling at a substantial loss. This usually occurs right at the market bottom. To add insult to injury, this is when the market starts going back up again. (Trading is a cruel game)

Skate.

 

[Skate]

It’s sad anytime someone loses money
Sometimes new traders can lose more than they can afford - in such a small period of time. It can happen & it can happen to anyone lacking the knowledge of what drives the market. Most traders focus on the "possibility" of what the markets can do for them not the "possibility" of what the markets can do to them. So, it’s only reasonable you must plan to lose & be the best loser you can possibly be.

I'll have a go
"Joe Average" always becomes excited when the markets are rising & they start to believe the hype, the media commentators, that everyone is making money but themselves. These new traders usually start investing without even trying to learn the rules of the game - a recipe for disaster!

Skate.

 

[over9k]

Consecutive down days
When there are a few consecutive down days, traders think in "possibilities" that what happens next can get ugly. Fear of losing money is what drives the market down. It's most "probable" that the markets will go back up. As humans, we are conditioned to think in terms of "doom & gloom" for survival. (That's not well suited for trading)

There are always two sides when handling down days
(1) Panic & sell or (2) hold & hope for the best.

But there is a third option
(3) Trade your plan. New traders know little how to preserve profits as they watch their profits quickly disappear, hoping that prices go back up again. Some can't sell because of how well the market has been going these last two weeks, so they hold on, & prices continue to fall selling at a substantial loss. This usually occurs right at the market bottom. To add insult to injury, this is when the market starts going back up again. (Trading is a cruel game)

Skate.

Also worth noting that this is precisely why hedges are so important and that the market can stay irrational longer than you can stay solvent.

I spent considerable time explaining in the coronavirus thread that the plummet we saw after the snowstorm was only going to be temporary, but how long that temporary was going to be could have been anything.

Hence why selling to bail out of a market that you know has gotten something wrong is a total gamble because for all you know it's going to figure out it's wrong on the very next day.

Hence if you're confident that it's a temporary thing/the market is wrong about something, it's either gamble by selling, or just pucker & hold.

However, if you have some kind of hedge, you can make a killing by selling A and buying B when A goes up and B goes down - as long as you're confident things are going to flip back in the other direction (the market has this particular move wrong) of course.

 

[Skate]

Personality traits
Trading doesn’t have to be super complicated or time-consuming. Personality has a lot to do with new traders’ ability to grasp & properly execute new trading information. What seems natural to many long-term traders seems alien to a beginner. You can’t control the market but you have full control over how you’ll react when trading becomes emotional.

Luck in trading
Those starting out, can "possibly" snag a lucky run but the "probabilities" of doing this is very low.

Skate.

 

[ducati916]

1. Exits need to fit your personality more than entries
I've rephrased that "exits are more important than the entry because it's a contentious issue". What I mean by "exits need to fit your personality" is that too many traders look at what makes the most money when backtesting. Doing it this way is "arse around". Why? because traders quickly realise that they can't trade the strategy because of the drawdowns, trade frequency, or other issues that cause them grief.

2.It's all about picking an exit strategy that you are comfortable with
Look at the exit on a chart. If you feel good about what you are seeing, you're in business. One of the first steps in becoming a good trader is understanding that you don't, shouldn't & can't maximise everything. So put that idea behind you.

3. Doing things, the hard way
When starting out most beginners will try everything & anything. The “Dump it here” thread tries to explain how trading works, while conditioning you "how to think" when you are experiencing mental stress (when a position or portfolio is under pressure). My advice is to keep every part of your trading strategy & plan as simple as it can be.

Skate.

1. More than entries/exits, your entire approach to trading must sit easily with your personality/emotional make-up. If it does not, it is highly probable that you will fail.

2. Exits (as are entries) are more than just exiting a trade. They are ongoing information with regard to the market you are trading. For example (and to emphasise the point) if your selection process (entries) are selecting technology stocks and over time entries fade from Tech to Banks, that is important information. It is also what has recently happened in the US (last 4 months or so). This information will, in the longer term/greater scheme, drive strategy decisions re. Bull/Bear markets and the employment of systems or strategies that can best capitalise within the current environment.

3. Nothing wrong in that. Unless you experiment with different styles/strategies, it is unlikely that you will find the niche that suits your personality and emotional tolerance.

jog on
duc

 

[IFocus]

May I comment here, lots of comments much enters into the psychology of trading with or without recognition.

But the simplicity of trading successfully (IMHO experience) is having a method, testing it to death (training your psychology )and becoming an expert in what market it works.

Understand what the market you are trading.

Then applying, accepting we are all human.

 

[Skate]

But the simplicity of trading successfully (IMHO experience) is having a method, testing it to death (training your psychology) and becoming an expert in what market it works.

@IFocus, you nailed it in one sentence - where I have made over 2,800 posts to say the same thing.

Skate.

 

[over9k]

May I comment here, lots of comments much enters into the psychology of trading with or without recognition.

But the simplicity of trading successfully (IMHO experience) is having a method, testing it to death (training your psychology )and becoming an expert in what market it works.

Understand what the market you are trading.

Then applying, accepting we are all human.

And if you don't know it well enough, don't trade it at all - just bet on it going up or down and then just hold.

 

[Skate]

I'm also aware we're near a weak time of the year (sell in May?).

"Sell in May and Go Away"
The theory suggests that a pattern exists trading in the month of May. Historically, the market declines around May but it could simply be a "Tax Strategy" to sell underperforming shares to secure an offset to capital gains. I'm only guessing here, but sell-offs do increase supply & depress prices.

The month of May - gets a bum wrap
The month of May could simply be referred to as a "month of lower returns" compared to the rest of the year. I should also say, underperformance can still have positive returns.

If you" Sell in May and Go Away"
It's likely you would miss the growth the market usually experiences during this month. I've looked at my monthly returns for the last 5 years & the months of May haven't been scary for me.

Backtest result
With my trading "Sell in March and Go Away" would work better for me.

All my systems went to (100% cash) in the last quarter of 2018.

Trading the last quarter of 2018 (calendar year) & trading the first quarter of 2020 (calendar year)
Both periods caused real concerns with my trading. I was saved from additional losses both times because of my GTFO filter (albeit a little late). Both periods caused uncertainty that I hadn't experienced before. The drop in my portfolio was horrendous both times even though the cause of the loss was completely different. I realise trading is not always peaches & cream, but to my way of thinking, there must be a better way of protecting my capital when the next crash appears.

Skate.

 

[IFocus]

@IFocus, you nailed it in one sentence - where I have made over 2,800 posts to say the same thing.

Skate.

Skate without over cooking the praise (but needs to be said).

Your thread "Dump it Here" should be a must read for any trader along with Peter's with genuine high level / quality content, that's not to take anything away from the other contributors to the forum of which are of also of exceptional high quality.


Cheers

 

[Skate]

@IFocus, thank you for the kind words.

Posting from my "point of view"
Trading has been exceptionally kind to me. Every post I make is for others to understand the dangers of trading (a little better).

My way of trading is not for everyone but profitable
I post true & accurate records from my actual trading to encourage others to read my thread.



Skate.

 

[over9k]

Always worth posting your numbers vs the market though skate - not to take anything away from you (at all!) but everyone's a genius in a bull market.

You've obviously beaten the market but would be beneficial for the newbies to show how much by and maybe make a brief post about how so few traders beat the market, those who do beat it by X or Y or Z amount and you've beaten it for ABC reasons etc etc.

 

[Skate]

Interested to hear your thoughts on DEG as I've held since 0.39.

@over9k, I realise this question was directed to @peter2 but as I'm a holder it's worthy of a post.

Trend following always looks easy
That’s because the principles are very simple. When looking at the chart for (DEG) perfectly displays "visually" trend trading in a "nutshell". The entries & exits can look impressive, but it's just a matter of jumping on a breakout & jumping off when it stalls.
Is just jumping on trends.

4 positions taken in (DEG) with "one dud" so far
The most recent breakout needs others to pile in to follow through. It's worth remembering all trends "come to an end".



Skate.

 

[Skate]

Always worth posting your numbers vs the market

Referencing returns "versus the market"
Means Jack to me. I never reference my trading returns in dollars or compare my returns to an Index or (another trader) because it holds "no value" in doing so.

The metrics
When I post the metric of my trading, they are the combined average returns from all the strategies I trade.




Cherry-picking returns
I also resist displaying the individual performance of a strategy as this leads to cherry-picking returns.

everyone's a genius in a bull market.

Hint
Trend trading works well in a bull market, that's a given.

Any day you don't lose
"Is a good day"

Skate.

 

[Skate]

Trading a combination of strategies
The most important thing is to keep trying various methods until you arrive at an approach that works as @ducati916 recently posted. Trading is all about trial & error. Unfortunately, the market often makes that quite difficult, because it is always changing, so the things that work best during one period may change. However, that doesn’t mean that you reinvent yourself every time you struggle a bit. After you develop a style, it is important to stick with it and not give up just because you don’t make immediate progress.

We are all different
We all have different levels of risk tolerance, patience, activity, & different approaches in handling the emotional ups & downs of the markets. What is comfortable for one will drive another to distraction & if you can appreciate that fact, arriving at a style that works for you is easier.

The equity curve displays that it's rising over time
The angle of the "overall rise" should paint a powerful picture for others.




Skate.

 

[over9k]

Referencing returns "versus the market"
Means Jack to me. I never reference my trading returns in dollars or compare my returns to an Index or (another trader) because it holds "no value" in doing so.

I don't follow, if the market rose by X% and you made X%, then your gains are no different to just sticking your cash in an ETF and walking away, i.e you've gone through all the time/effort/work to make a net difference of nothing?