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john shih wrote:
> Trendfollowing in its purest form will not work. An established trend
> simply means the market is making successive new highs or lows. If everyone
> were to go out and place a buy stop one tick above a previous high, we'll
> all be rich. We all know this is not possible.
Certainly, we *all* can't do this, but that doesn't mean that you and I can't.
For instance, we are looking to enter something on a breakout, and a lot of the
buying pressure is due to accumulation, but we are only looking for a little
ride here. It fails to move our way like we anticipated, so we jump off close to
even, or it goes on a little run, and we grab the profits.
> Counter-trend trading in its purest form will not work either. It
> doesn't take someone with a very high IQ to realize that it is plainly
> stupid to step in front of a freight train. A counter-trend strategy only
> makes sense only when one tries to identify an actual change in trend and
> try to get on a new trend at its earliest moments.
I agree that the "earliest moments" thing is preferable, but that's more to do
with my personal style than anything. I do a lot of these trades as well - my
eyes widen when I see something coming in hard, and look to counter it at the
appropriate time. This is as "freight-trainish" as it gets, and you have to
have the dicipline to get the heck out of the way when you're wrong, but if this
strategy is used right, the results can be very nice overall. As well, there
are often some nice secondary patterns that develop off of these.
The bottom line is you need to be where the action is going to be in future
bars, whatever your techniques.
Good trading,
A.J.
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