Trend Following - A Complete Guide
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Thread: Trend Following - A Complete Guide

  1. #1
    This really is a Trend Following method in every respect. It's necessary to understand that you can observe different Trends based on what Timeframe you're looking at. I trade the Daily and 4hr charts. I also have different ways of entering the direction of the Trend, these change to entering through pull backs from the Trend from getting in through the first stages of the Trend. That is the reason why I titled this guide. You should find everything in here that you need to generate some money in this organization.



    I really don't have any specific pair that I prefer to trade, my sole criteria is that the pair is really Trending. Are support and resistance, trend lines and fibonacci retracements.



    Why share this you may ask? Why not? I spend a lot of hours in front of the display regular (I trade for a living) and it becomes boring, so I figured why not talk to like minded individuals. I used to participate on this forum a lot more often than I do and have learnt bits and pieces so why not share myself.


    I know and fully accept that there are many ways to make money in this company, mine is not the only one and I am not the inventor of the wheel, but I've just discovered what works for me. So there is anything new in here, no holy grail, only a string of systems and systems.



    If you're going to adhere to this system you have to accept that we're searching for the home runs, the big trends that can make you exceptionally healthy returns, but to get there you'll have to endure a few small losses and break trades along the way.


    We are Trend Followers, if you would like to know trend following much better as a theory and philosophy you can read a great book by a man named Michael Covel its called Trend Following



    OK so let's get into the approach.

  2. #2
    96633
    Quote Originally Posted by ;
    Brenza I like the sound of that but have a few worries. What size are stop losses? Isn't it stressful having positions open at a time for days? However, probablly most of all how long does it take to analyse 25 pairs every day

    On such topic Micardo is it possible to provide us a run-down in your start of the day routine? How long can you spend analysing the charts before taking a transaction? And how exactly will you start the analysis of a pair? Do you draw trend lines Daily down to 5m? Is there some'trending strength chart/indior' you use to make...
    I think you'll have to analyse just 1 time per day if you are using daily chart and that shouldn't take over 2 hours per day for profitable pairs.I don`t think there's other method that is less stressful.Also I presume getting positions running for many days maybe dull but not stressful.

  3. #3
    96633Few charts with example will be Merry Christmas!!!
    Quote Originally Posted by ;
    I hope you all understood all that! In case you have any questions I will do my very best to answer them although please bare with me since it's my beautiful daughters and Christmas would not forgive me if I don't pay them whole and undivided attention on this period:--RRB-.

    I guess you'd have gathered that I haven't given you a step by steo guide concerning how to trade. I have done this intentionally as I think you'll be a better trader should you decide for yourself what works best for you as oppose to having someone do it all for you (I may be wrong)....

  4. #4
    96633MERRY CHRISTMAS EVERYONE!

    Don't worry at the New Year I will place plenty of charts and setups, so that it will become evident to everybody.

    Have a great day everybody!

  5. #5
    96633Looking foward to more Micardo. I use a fad trading method that I expect to place in my own thread in a future date and have been trading for just a little two decades.

  6. #6
    I want to thank Micardo with this very enlightening thread. I hope he had a very merry Christmas. I wish him a happy and prosperous New Yearand so that we can again soak up more of expertise and his trend-trading wisdom most of us hope to hear from him soon.
    Secondly, I confess I am not a trend follower. My trend following some time ago ended in tragedy. The USD/JPY had been trending down since 2007; so I shorted the market. That day the Central Bank decided to intervene and dumped billions of Yen on the market; in order to push down the price of Yen and support their own export market. Awhile ago I detected EUR/CHF was trending down for quite some time. Again I shorted the market. Yes, that the Swiss Central Bank hit the market with wave after wave of Francs! Yes, I became paranoid (Can the Central Banks watch my trades?)
    I have attempted scalping; however, not mastered the art. The one thing I have found profitable is the Carry Trade (market Yen and buy Audies, collect curiosity ); but being greedy, I am trying to find a larger profit margin in trend trading. (In case you are not greedy; you should not maintain Currency Market ).
    Having said that, I know the newbies here want the particulars of when to trade and when to exit; so I would now like to put in my two pips worth by laying out my trend-trading plan for 2011. Everybody needs to have a plan, it is possible to make your own trading plan up; although this is just a suggestion.
    1. Draw on the trend lines on the daily and weekly charts.
    2. Trade the daily tendency ; but just when it's in the exact same direction as the weekly trend.
    3. Open trades when price bounces off of this trend ; pulls backor whenever a trading pattern seems such as a double top or bottom, head shoulders, etc..
    4. Use small lot sizes and add to position when trading opportunities seem.
    5. Trade all major currency pairs; but no exotics.
    6. Use a 250 pip trailing stop. Yes, it seems too large; but see #7. (Micardo utilizes 100 pips).
    7. Check charts twice or once . Exit when trailing stop is struck; or if trend line is broken; even if a change candle pattern seems, i.e. shooting star, hammer, engulfing; or when it appears bad. Get out first, ask questions afterwards. See the interest rates of the Central Banks. In case the interest rate is moved against the transaction, then exit. In case the interest rate is moved in favor of this transaction, then add to it.
    Alright, so in general, trade the moment it looks great and get out when it looks bad. Trend followers are following hundreds to thousands of pips (everything the market will give); but they will need to get out when the price reverses. Watch for signs of a change. It should show in the candle sticks, or a trend break. It's confirmed by a candle in the direction of the reversal. This very long candle eats up profitdon't wait for confirmation. It's simple to get back in, if the trend resumes. Anticipate many losses, and a couple of big pay days.
    Make sure trend lines have been drawn properly. If it's perplexing, google trend lines and study the topic.
    Ignore swap. Shorting the Audie or the Kiwi will cost you approximately 1 pip per day. A trend can make 5 to 50 pips each day.
    The forex market is driven by interest rates, the Carry Trade. If
    traders are greedy they market the low interest currencies and use the money to buy the high-interest currencies (market Yen, Francs and
    US Dollars; buy Audies, Kiwis and Euros, and accumulate interest). When traders are fearful they unwind these places. Because it generates trends this is fantastic for trend followers.
    Happy New Year, and Happy trading!

  7. #7
    96633Hi Micardo,

    Many thanks for taking time to begin and add to the thread. Due to my schedule I have to exchange the daily charts, but when I can learn how to do it as you've described here, the dailies will be just fine, and without anxiety. When you enter into a transaction Can you exchange one complete contract per transaction? Are you currently trading numerous pairs each week? Are you currently using a set % of your account on each trade? Can you restrict the complete % of your account you exchange on any given week? .

    Sorry for all the questions here, I am just attempting to get a sense of the genearal method of trading the daily charts.

    Happy New year to you and all on this thread.

    Charles

  8. #8
    96633
    Quote Originally Posted by ;
    First, I would like to thank for this very informative thread. I hope he had a very merry Christmas. I wish him a happy and prosperous New Year; and most of us hope to hear from him again soon; so that we can again soak up more of his trend-trading wisdom and experience....
    Hi JerryCollie,

    Thanks for your wishes and I hope the exact same for yourself and all other people on this forum seeking to improve themsleves and achieve their ultimate goals.

    Sorry to hear about your bad experiences with Trend trading, I know sometimes it can really feel like the markets know just when you are getting to the markets and exchange against you because they know its you... It has happened to me more than one occasion. In fact I used to joke with other traders that all they needed to be profitable was to fade me when I put in a trade:--RRB-.

    However I believe you were particularly unfortunate to be on the incorrect sidfe of two central bank interventions. Although in the event that you take a look at the markets directly continued to trade lower. To be honest the Japanese central bank intervention was forthcoming, although many thought it would be and when the pair reached the 15 year low, but c'est la vie.

    I believe fundamentals are very important in the long run and opinion is much more important in the short to medium term. For example the expectation of the second round of QE from the Fed led the dollar lower against everything if they eventually declared? The dollar rallied. So although it was news, the markets expeation of what was going to happen is what drove the prices rather than the announcement itself. There are loads of other examples about this and if folks are interested in fundamentals I would be pleased to bring some of my thoughts here and there and help you guys learn that as well.

    Having said that, you need to be careful about paying to much focus on fundamentals when trading technically. When trading technically in certain respects you need to dismiss the fundamentals and exchange the technical setups when they are about. A complete example of this was the decline in the dollar against the JPY for much of the year. There's absolutely no reason apart from a trade surplus the Yen ought to be strong. Japan faces deflation and thus isn't going to raise rates anytime soon, whereas we all know that once the Fed begin to speak about withdrawing the stimulus and the markets expect a set of rate hikes the dollar will rally. Now having that advice may have kept you from shorting the USD/JPY, but if you look at the charts you can see very clear signs to short... so are you willing to give those up profits simply because of the fundamentals? What I would say would be to pay attention to fundamentals but don't let them prevent you. Maybe enter smaller sizes.

    That I believe that your trade plan looks good! The one pointer you may be given by me in the event that you don't mind is if you are trading dailies, look closely at the levels that are weekly and monthly but don't constrain yourself. Trade the daily trend but be aware of the major levels on the larger timeframes.

    Sorry for quite a lengthy post but I hope that helps and sheds some light on my thinking.

  9. #9
    96633
    Quote Originally Posted by ;
    Hi,

    Many thanks for taking time to start and add to the thread. Due to my schedule I have to exchange the daily charts, but when I can learn how to do it as you've explained here, the dailies will probably be just fine, and without stress. Do you exchange one full contract per trade when you enter a trade? Are you currently trading multiple pairs every week? Are you currently using a set % of your account on each trade? Do you restrict the entire % of your account you exchange on any given week? .

    Sorry for all the questions , I am just attempting to have a sense of your genearal...
    Hi Charles,

    Thank you for your questions.

    It is less stressful and I believe that you will enjoy it:--RRB-

    Ok regarding my risk, the account I exchange is probably considerably larger than most so I exchange a few more than simply the one contract each trade. What is important is that my risk, I generally take only 0.5% to a max of 1% risk per trade. This is because I love to take over just one trade at a time, I monitor 30 pairs. I would never be over 3-4. I really don't have risk profiles, simply an overall profile of more than 3-4% at anyone time.

    What decides if I consider 0.5% or 1% risk per trade is simply to do with what the setup look like. If we are not at a completely established trend I'd only be taking 0.5% per commerce where as if we were in an established trade with opinion on our side I might be tempted to go for 1%.

    What I really do guarantee though it my risk:benefit is 1:1.5 and more oftent 1:2 and over. This way you simply require a strike rate of 50 percent to stay profitable.

    Talk to you soon.

  10. #10
    96633
    Quote Originally Posted by ;
    First, I would like to thank for this very enlightening thread. I hope he had a very merry Christmas. I wish him a happy and prosperous New Yearand most of us hope to hear from him soon; so that we can again soak up more of his trend-trading wisdom and experience....
    Hello JerryCollie,

    oh only one more point. Regarding your stoploss... 250 sounds very generous and in some cases is completely necassary. But I wouldn't restrict yourself to that, there will be times when you can bring the halt loss nearer. For me it is most important to put it behind a significant level and correct your position dimensions.

    My 2 further pips:-)

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