Trend following/ Intuitive trading:
Hi Wudanshan Kapricorn....
You ask good questions but I suggest you disregard some of the concepts you have labeled for trade techinques.
First, Trend Following; Never invest in a black box...I have never heard of anyone making money with them. A main point you might consider is that trend following models and hedge fund charter requirements vary substantially. On the professional market not many people would accept the massive drawdowns and logic that is in most of these books. A CTA or Hedge Fund Manager looks for traders naturally with good results, but of upmost importance is the relationship between profits and drawdowns. The are many models and names of methodologies that consider the mathematics of bottomline P & L, for instance, the "sharp ratio". Here's what it comes down to, bottomline, in my opinion. How do you define a trend, what timeframe(s), how/where do you participate (get in), and how do you manage the trade? And, on top of that, how/when do you get out if your trend expectation does not happen. These are complex issues, and you will not find the answers in books, unless you find one from a proven successful trader/writer who has managed money and trends in a market that mimics today's market. That's a toughy, imho, because we have been hitting uncharted waters in many ways, i.e. volatility and range excursions. Personally, I have taken a number of proven internals and put them together in a rule set that values the market movement and shapes the character of the market. From this I deduce my trade/money management. I'd rather take 5 swings at the ball with limited risk that may equal what another system would risk in a single trade. Again, don't take big hits...........for any reason. Tons of traders have blown out holding out for the "trend" to turn and do the right thing (for them). To shortcut your learning curve, I'd find someone good with experience who is willing to share methodologies/systems with you.............but remember, you get what you pay for.
On "intuitive' trading, or contrarian traders, therein lies another wide open field. Intuitive traders in general believe they have the pulse of the market, and the information they are relying on is director of their "intuition". Quite frankly, intuition alone is a tough sell......in the old days we used to "read the tape", and then form an opinion, but it was never likened to a crystal ball. Real market intuition comes from decades of personal experience, and exposure to everything under the sun..............thus the adage "expect the unexpected".
An educated contrarian trader does not merely say............ "well, the market's up, therefore I'll go short, because laws of gravity state that whatever goes up must come down". However, a good contrarian often takes clues from the market, like today, when we get bad data news and the market goes up. That's a message. Successful contrarians I've communicated with have a very rigid approach and rule set for all actions to be taken in the market. For instance, a trader (like Jay) who has a very solid ability to see and define major and minor areas of support or resistance many use these as potential entry areas. Let's say in the EUR/USD a trader sees major support coming in at 1.2400 for instance, and that is confirmed in weekly and daily data, and he sees minor support @ 1.2500.........he may deduce that buying a little at the even, which is a big round number, and has a plan that would allow him/her to build, or add to the small start, then they know that the floor for them is 1.2400.......... if it goes up from the start, then at least you are in. If you build to a full position @ 1.2400, then it either holds major support or you are gone, out completely. Again, personally, I NEVER enter a market till it is traveling in the direction of my trade.........straight, hard, fast rule.
Hope this helps... good trading.
San Diego bobl |
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