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Stewart,
Good for your friends and good for you. However, the probabilities favor
staying with a trend on a daily chart. That's a fact. When market goes up,
people are more willing to step in to support a market, when it's going down
fewer people are willing to step in to support a market. That's a fact and
it's highest probability play.
Again I think you're leaving out the context in which your friends counter
trend trade. The smart play isn't countertrend trade a market like Canadian
Dollar futures. If you must countertrend then finding a market that's not
trending as strongly would be better. This is the crux of our problem I
think.
Of course, aren't you an equities trader? There's so many markets out there
in this arena you can always find one to short while the S+P goes up (or has
been).
Again, countertrend trading a trending market isn't the highest probability
play for these reasons. Therefor I charcterize it as not the smartest play.
It's true: trading is about trading on the side with the highest
probabilties. It's also true the the highest probablilities are found with
the trend. A market that's trending weakly has a good play as it falls into
support or moves into resistance. For a stronger trend, say up, the
probabilities favor buying the dips rather than trying to fade it as it
approaches resistacne. The probablities say that it will clear resistance
rather than fall through support.
Of couse, trends need traders like you to keep them going. If you want to
fade a market like Bonds and S+P (when it's going up or down) then not only
are you subjecting yourself to unecesarry risk for comparatively little
reward but your chance of ruin goes up dramatically.
Good Luck,
Brian.
-----Original Message-----
From: Stewart Taylor [mailto:staylor@xxxxxxx]
Sent: Friday, September 04, 1998 5:03 AM
To: bnm@xxxxxxxxxx
Cc: omega-list@xxxxxxxxxx
Subject: RE: Taking Losses
I have always been a counter trend trader and done just fine thank you.
Some of the best traders I know work the other side of the trend.
Charectorizing counter trend traders as "just not smart" is either not very
smart or a sign of inexperience.
Why, in a business where there are so many ways to skin the cat are we all
so convinced that our way is the only way or even the best way? Frankly
I've known traders to do quite well using astrology, Gann, Elliott and some
of the most god awful techniques that I have ever seen. BUT: They all had
two things in common, they were comfortable with their methods and they
practiced very strong risk and money management techniques.
>Why would you want to trade against the trend? I'm assuming you mean
>intraday trend, not daily trend. Trading against the daily trend is just
>not smart. The swings are smaller on the reverse than they are in the
>direction of the trend. The probabilities of a body in motion continuing
in
>that directions are overwhelming. Profits are small trading against the
>trend while the risk of ruin goes through the roof.
>
Stewart Taylor
Taylor Fixed Income Outlook
Voice: 501-219-9774
Fax: 501-228-0963
E-Mail: staylor@xxxxxxx
Web Site: http://www.cei.net/~staylor/
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