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Trend Following by TrendFollower

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The one point I would like to make is that different conditions sometimes require different strategies.

Primarily I apply trend following principles. There are times when I will apply scalping, swing trading and even day trade. It depends on the market conditions.

My main weapon is trend following for trading but one must have an armoury of weapons at their disposable and trend following is merely one of the weapons that can be used. 

My investing philosophy is totally different and I apply a 'Pound Cost Averaging' strategy with lump sum investments on major corrections and drops when there are recessions, financial crisis or market turmoil. 

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This is a beautiful trend :)

Ticker : BFAM

Sector: Services

Time frame : Monthly

 

BFAM trend.png

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In my personal opinion, trend following, is better suited to 'daily' timeframes. That is not to say it cannot be applied to short timeframes but my personal preference is to use the 'daily' chart structure and using moving averages based on the 'daily' charts. Now that is just my personal preference based on my trading style.

I just want to make a point that trend following is not a 100% win strategy or anywhere near. You are likely to make lots of losses but it is about keeping those losses to a minimum and making sure you actively participate in the strongest trends and these winners though they may be few should outweigh a larger number of losses. Now I accept this is not for everyone as it means you have to accept losses and no trader will enjoy that. If a trader cannot accept losses then trend following is not for them. 

Commodities in my view and experience are a good asset class to use when testing potential trend following strategies. An important factor is the ability to be able to go 'short' as well as 'long' depending on the trends presented. If a trader does not go short when the asset class in general is showing bearish price action then it reduces the ability to make profits in all market conditions. The only time I tend to sit on the side lines is when the markets are trending sideways. This is where trend following struggles in my opinion and as a result I struggle during such periods in the chosen asset class I trade which tend to be Commodities and Cryptocurrencies.

Some of the important indicators and signals one may wish to consider are the use of moving averages, volume, momentum and trend strength. What I have learnt over the years is that market sentiment is just as important if not more when trading based on price action than fundamentals. There are times when a trend manifests itself based on strong sentiment which is disconnected to fundamentals. A trader has to be aware of this. An example of this one could argue are US indices. There is clearly strong sentiment present which is manifesting itself into a strong trend. The fundamentals if they are to be believed do not always support the trend strength. 

Trend Following can be very easy but it is very difficult as one has to show discipline in following their own rules and stick to them in difficult periods. However, there is no reason (I have) why you cannot adapt your trading rules to certain market conditions which may appear which warrant a change of strategy. Your trading plan should be flexible and fluid and you should be able to make adjustments should the need to arise. 

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I think an important part of 'Trend Following' is 'Risk Management and Position Sizing'. I see a lot of comments on the IG Community by traders who have no real sense of position sizing and risk management. 

So for example when do I increase my position? Normally if the signal I am getting is that the trend is strong or getting stronger. Otherwise, I will not increase my position. If the trend still exists whilst I am in a trade but it is not getting stronger then I will not necessary 'pyramid' and add to my position. This is a part of my risk management strategy. 

Yes of course I want to maximise my profits but more importantly if the trade goes against me then I want to ensure I lose the minimum amount possible based on my trading strategy. So risk management is a crucial part of not just 'Trend Following' but any serious and credible trading strategy. 

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The general theory on Trend Following is that you do not need to conduct any fundamental analysis. You simple trade based on price action.

I must admit I have my own trading plan which requires me to conduct some fundamental analysis. I want to trade the strongest trending assets whatever they are. I believe that by conducting fundamental analysis on the strongest trending assets it can help me to select those which also are supported by the strongest narratives. 

So I find conducting fundamental analysis useful in my journey to get from trend identification to trend / trade selection. Now this tends to go against the grain and theory written about in relation to Trend Following. However, I want to create a trading environment and trading strategy which suits my personality, needs and goals. I find this approach very helpful and useful when trading the strongest trending commodities. If there is a strong narrative and reason why the price action is behaving the way it is then it really helps me in my decision making. 

 

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One of the key concepts is to make trading decisions based on data rather than emotions. One must put their emotions and personal beliefs to one side. Use the data which is being generated by price action and use it along with other indicators / signals to make an informed decision. 

Now different traders will have and use different risk/reward ratios. This is true between different trend followers. Some of the aggressive trend followers will take on far more risk than some of the more less riskier trend followers. 

Another point I want to make is that you do not have to be exact with trade entries and trade exits. This is something that traders who do not believe in trend following or think trend following does not work will pick on. They will state that your trade entry / exit was wrong based on their own personal trading principles. The beauty of trend following is that the entry and exit points can be far more relaxed and flexible than other trading strategies. 

Trend Following can be used across most other assets. So it can be used to Commodities, Cryptocurrencies, FX, Bonds, Equities, ETF's, etc.

I personally like to see 'Higher Highs' and 'Higher Lows' being formed in an upward trend and 'Lower Highs' and 'Lower Lows' being formed in downward trends.

Looking for breakouts is a key area and the earlier one can identify a potential trend to trade the better. The reason why I use technical indicators / signals is because it takes my emotions out of the decision making process. I am not emotionally attached to any specific asset and nor do I hold any loyalty to any specific asset. I want to trade the strongest trending assets what ever they are.

Having entry and exit rules which are determined by technical indicators / signals removes emotional decision making. It allows you to trade the strongest trending assets. Those traders who are allowing their personal emotions, ego and personal beliefs cloud their judgement cannot trade Bitcoin, Litecoin or any other top performing Cryptocurrencies which from a performance perspective have trounced other more traditional assets. 

 

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If anyone wants to share the 'Strongest Trending Assets' in this thread then please feel free to do so. 

For me 2019 has been all about Litecoin and Bitcoin. They have been the two strongest trending assets I have been trading along with Bitcoin Cash in third place. 

 

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What sort of time period you will be looking at ?

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@MYK1,

You should use a trading strategy and philosophy that you:

  • Understand
  • Can apply and execute
  • More important believe in

I am not suggesting you must apply trend following principles. I am sure I will be accused of that by others. I can only discuss things from a trend following perspective as that is what I have chosen to use after looking at all the possible trading methodologies available to me. 

I find it easier though it takes a lot of discipline and one must follow the rules which they set as otherwise totally pointless. 

Some of the important technical signals / indicators that you may wish to look at are:

  • Price Action
  • Volume
  • Moving Averages

There are others but I am keeping it very simple right now. You need to write down rules which you will follow in order for you to enter a trade and exit a trade. You need to write down rules in terms of how much of your trading capital you will allocate to each trade. You need to write down rules for which specific assets you will trade and more importantly why. For example trading FX is not in my trading plan so I go no where near trading them. You must write down your rules for setting stop losses. When will you switch to trailing stops? What will be your stop loss distance? Why?

Most importantly you must accept losses as none of us have a crystal ball and the media are not always right so you cannot believe everything you read. None of us can predict the future. What we must try and do is ensure that there as many positive conditions in our favour based on the direction we are favouring for our trade. We must increase the odds and probability in our favour as much as possible. Even then there is no guarantee that we will succeed or profit but that is what we must try and do on every trade. 

You must have a plan on how you are going to enter and exit a trade. Without this you are merely speculating, gambling, betting, etc. 

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17 hours ago, TrendFollower said:

@MYK1,

You should use a trading strategy and philosophy that you:

  • Understand
  • Can apply and execute
  • More important believe in

I am not suggesting you must apply trend following principles. I am sure I will be accused of that by others. I can only discuss things from a trend following perspective as that is what I have chosen to use after looking at all the possible trading methodologies available to me. 

I find it easier though it takes a lot of discipline and one must follow the rules which they set as otherwise totally pointless. 

Some of the important technical signals / indicators that you may wish to look at are:

  • Price Action
  • Volume
  • Moving Averages

There are others but I am keeping it very simple right now. You need to write down rules which you will follow in order for you to enter a trade and exit a trade. You need to write down rules in terms of how much of your trading capital you will allocate to each trade. You need to write down rules for which specific assets you will trade and more importantly why. For example trading FX is not in my trading plan so I go no where near trading them. You must write down your rules for setting stop losses. When will you switch to trailing stops? What will be your stop loss distance? Why?

Most importantly you must accept losses as none of us have a crystal ball and the media are not always right so you cannot believe everything you read. None of us can predict the future. What we must try and do is ensure that there as many positive conditions in our favour based on the direction we are favouring for our trade. We must increase the odds and probability in our favour as much as possible. Even then there is no guarantee that we will succeed or profit but that is what we must try and do on every trade. 

You must have a plan on how you are going to enter and exit a trade. Without this you are merely speculating, gambling, betting, etc. 

Hi as you were saying to begin with commodities so I did gone through few need your input Please 

  So first thing I came across was Rice as it suppose to go up as it is a very small sort of  uptrend and its also supported by report which  was published on 25 june that this year due to some environmental  issue the growth is less than average and when I see the previous year data shows the price is around 1000 ticks more  than this year July so hard decision and amazingly after 25 june when the report was released don't see any major price action.

Second thing which I came across and find quite potential was Live Cattle but it might be against your trend following principle but Please have a look at it so its usually at its lowest price in July and it is indeed because its been on the lower ten from quite some time but the Good thing is if you buy now and sit over it for couple of months there is a huge potential but the price below this level was back in 2016 so ideally it should go lower than this price but you never know think i will say to keep monitoring it until one makes sure that now its going for uptrend and than buy it but again on one hand trends can change and on the other hand if you wait too much as you say "will be late to join the party "

Please have a look and shed some light and also if you see any commodity you think is of potential please update 

Many Thanks

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@MYK1,

You first need to decide what your trading philosophy is. What trading methodology are you going to apply? You must decide upon this first as otherwise it really does not matter what I suggest (and I can be wrong) you will find it extremely difficult. 

If you want to try trend following then that must be your personal choice. You must identify those commodities (if that is where you want to start) that have strong trending price action either upwards or downwards. This means you need to go through the charts and have a look at what they are showing you. Trend following requires trading based on price action not fundamentals. Yes I will look at fundamentals to help understand why the price is moving but my trading decisions are based on price action alone. 

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A lot of traders think you need complex computer systems which I do not think is necessarily the case. I think how much knowledge, experience, capital and ability / skill the trader has is far more important than a 'flashy and complex computer system'.

I can't remember where but I read a fantastic piece where there was a chart with lots of lines, circles, more lines, different colours and all sorts and the writer described it as 'mental masturbation'😂😁😀 

I cannot stress enough the need for a trading plan as without this how can you set your trading rules? If you do not have strict entry and exit parameters predefined then you have no rules to follow and then have no real trading system. I think this part is extremely important and far more important than expensive computer trading systems, drawing charts, diagrams, lines and using different colours. Those bonuses can come later on. Firstly a trading plan, a clear set of trading rules and to establish a way that allows you the ability to execute your rules is far more important. 

 

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A lot of people I have come across look at trend following and base their understanding on what they have read in books or acquired through some form of media. Some of this can be wrong, some of this may not be from a credible source and some of it could be biased either for trend following or against trend following.

I have been using trend following principles for many years and over this period I have tweaked my plan, strategy and system many times. When I have shared trades some have jumped on me in relation to my entry price. They fail to understand that the beauty of trend following is that the entry price is one of the least important factors. You are not looking at the optimum or perfect entry point. Yes, I use certain technical indicators but for true trend following there really is no need. My version is one that I have adapted and tweaked to suit my personal needs and personality. I shared some live trades and some of the negative comments I got were staggering. 

I have found that some people think that to make profits consistently you need a complicated trading system. I agree that you need a trading system but I disagree that it needs to be complicated. Some think that a simple trading system which I think mine is simply cannot work because it is too simple. This is the key point. Trend Following is a simple trading style. Trend Following is all about identifying the strongest trending assets as early as possible and trading them. If you get the direction of the trend right then you stay in as long as possible and if you get it wrong then you exit as quickly as possible. Trend Following does not have to include complex charts, complex mathematics or complex technical analysis. 

I do not just trade one asset class. I trade several. I could trade Commodities, Cryptocurrencies, Bonds, Shares, or where ever I have identified a strong trend. This increases my potential to make profits rather than sticking to just one asset class. I find sticking to one asset class as a hindrance as it decreases the amount of profit you can make. 

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Thank you all very much for your kind messages to me in relation to this thread. Apologies for not responding individually to you all (I was tired and being a bit lazy) so I thought I would just do a generic thank you here. 

Whilst I am here I thought I may as well add to the thread. One of the reasons why Trend Following suits me personally is because as long as my trade is in the direction of the trend then I do not need to worry about the price fluctuations which occur in all trades regardless of which asset you are trading. I do not have to have a tight stop loss and as long as my risk tolerance can ride out the volatility (this has been tested to the extreme on Bitcoin over the years) then I can hold on to my winners and enjoy trading and making profits. Regardless of what timeframe you use the price will move up, down, sideways, rangebound, etc. Trend Following allows me to not worry about those price fluctuations as long as my trade is in the direction of the overall trend and not against it.

I mention in several of my posts about making assumptions and allowing the price action to test my assumptions. If you follow the price action of an asset and then execute a trade on that asset then you are in fact betting on the direction of the trend continuing. Therefore an important indicator that I tend to look at is 'Momentum'

Some of you who are interested in mathematics may have come across 'Martingale'. I came across this as I enjoy playing Poker in my spare time and I met the winner of Poker Million (cannot give their name here as they would not want me to) but for any of you interested then you may want to 'Google' it, especially if you are interested in odds and probabilities which are others things which I constantly refer to in several of my posts and threads here on IG Community. 

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Just for the record, I do not adopt the 'Martingale' approach but I am aware of those who do when betting. I would not be surprised if traders unintentionally knowing that it was referred to as 'Martingale' are doing so too. 

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When trading using trend following principles if one uses a single market or limited different asset classes then in my personal opinion it reduces the chances of success not increases it. There could be times when that asset class is just not trending and therefore one may miss out on an asset class that is trending strongly. For me and this is just my personal opinion one should try and trade as many different asset classes as possible to increase the chances of profit maximisation. One must put their ego, wisdom, emotions, personal beliefs to one side and try and trade the strongest asset classes regardless of what they think of them personally. They should let the price action dictate and nothing else what they trade.

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Trading only the strongest trending assets gives you an 'edge' as it increases the odds and probability in your favour rather than trading a specific asset you are comfortable with or not willing to trade certain asset classes because of your personal views, emotions or ego. 

Identifying those strongest trends as early as possible and trading them provides you an opportunity to maximise your profits when combined with effective use of leverage as long as you are trading in the direction of the trend.

Some of you will be wondering that this sounds all too easy. It is not complicated enough. It does not involve complex mathematics, or complex charts with lots of lines, lots of arrows, lots of chart analysis, etc. Those things are based on historical data and information and does not guarantee future successful and profitable trades. Nothing does.

For me it is all about identifying those strong trends and trading them in the correct direction as early as possible. If you can then use leverage (based on risk tolerance) to increase your profits then this strategy does not require complex charts, complex technical analysis or complex mathematics. It does however require a trading plan, trading strategy and trading system. It requires discipline to follow pre determined rules for entry and exit. 

 

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Just the usual 'flooding' taking place. 🌧️

Following a trend is like following a man who is throwing £50.00 notes at you to collect. If you travel in the same direction then you are likely to collect more of the £50.00 notes.

Now imagine if you decided to travel in the opposite direction to that man. Are you more likely to collect those £50.00 notes? Variables could assist you like the wind blowing the £50.00 notes in your direction but this would require luck which is outside of your control. You are more likely to catch the £50.00 notes the man is throwing if you travel in the same direction.

Establishing the direction of the trend, the strength of the trend and the momentum of that asset is key in my opinion. 

 

 

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36 minutes ago, TrendFollower said:

Establishing the direction of the trend, the strength of the trend and the momentum of that asset is key in my opinion. 

@TrendFollower

Very true, but there is more to it than just that. You must define your trend and also define a rally because a rally may last several days or more but there has to be a pull back to the trend and a good trader will take profit or even reverse his/her trade during the pull back. This also helps trade more volatile trends not just a rally. You can also have an extended rally where the trend pulls back a little but not to the trend then pushes on this is a sub trend. Take a look at this chart and see if you can identify the rally, the trend and the sub trend. These trends form the basis of my strategy, I hope this will help you. 👿

us30-h4-ig-group-limited.png

  • Great! 1

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@Foxy,

Yes I know there is more than just that. I try and keep my posts simple for those who follow me. For those who either know it all or are expert traders then they will know all about the more intricate details.

You state that a good trader will take profit or even reverse their trade during the pull back. This all depends on what their trading strategy is. Trend following principles suggest that you let your winners run and cut your losses short. It is about holding on to your winners. You are trading using a longer time frame like 'daily' or greater and a longer time period. The beauty of trend following is that you do not have to worry about the daily price fluctuations or extreme volatility.

So for example if someone following trend following principles identifies the strongest trending asset at the earliest possible time (breakout) and trades in the direction of the trend they will hold that trade regardless of pull backs (pull backs are just normal price action / price behaviour) and are not a reason to sell by itself. Some trend followers will not trade every movement of a trend. This is more for day traders or shorter term traders (possibly even swing traders). I will hold positions for days, weeks and even months. I am a longer term trader who trades trends. I do not trade the short price fluctuations and shorter price behaviour. For those that do that is fine. 

When you place a trade you do not know for sure or cannot accurately 100% predict what will happen to the price going forwards. No one knows. None of us have a crystal ball. 

Your strategy is different to mine and it does not really help me but thanks anyway. What is with the purple face, I don't understand it. Is it positive or negative? When I am 'Long' or 'Short' trading a trend in a particular direction I am going to hold my trade unless the trend reverses. The pullbacks will not necessarily affect my trading position. I want to let my winners run for a long as possible and I have no time limits. It can be weeks and months. That is not a problem for me. Your strategy is different which will suit your needs and personality as mine suits my aims and goals. 

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The way my trading strategy is set up means I do not have be right on the majority of my trades. The key metric is my overall profit at the end of the year from my winning trades against my overall losses at the end of the year against my losing trades. 

I can be wrong for say 60% to 70% of the time but still make more profit from when I am right say 30% to 40% of the time which more than covers my losses. This is only possible if I cut my losing trades quickly and let my winning trades continue.

I think over the years my percentages are far more better as I only look to trade the strongest trending assets which has allowed me to have more winning trades than losing trades. This was not the case during my earlier years. It took me years to realise that by only trading the strongest trending assets regardless of asset class, regardless of personal opinion, personal views or personal emotions can one really maximise their chances of success and maximise their profit potential with the odds and probability increasing in their favour. 

I am not a fan of Gold but it will not stop me trading it if it is the one of the strongest trending assets. I am a bullish on Bitcoin but accept it could crash and become worthless but that still does not stop me trading it if it is one of the strongest trending assets. This mentality is necessary for my trading strategy as if I cannot do this then I cannot achieve the profits I want to achieve. Bonds are another asset which at crucial times are overlooked. The German Buxl has provided not only a strong trend but less volatility than say other assets.  

The asset class does not matter. It can be equities, commodities, cryptocurrencies or bonds. It does not matter what the asset is. It is the strongest trends you are trying to identify with a view to trading them in the direction (not against) the trend. 

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I found this article rather interesting.

Why technical analysis is shunned by professionals

https://www.followingthetrend.com/2014/05/why-technical-analysis-is-shunned-by-professionals/

A lot of people who use technical analysis don't know exactly what it is. It cannot predict with accuracy the future price action. None of us can. 

From my understanding technical analysis is a tool that can be used by a trader. It is a risk management tool that a trader can use to create trading set ups for themselves. Yes in my opinion one could use it to try and 'forecast' future price action but all it would be is a forecast and the price action would confirm or reject this forecast. 

A point that anyone who is using technical analysis must understand is 'subjective bias'. They will interpret the data based on their 'bias'. 

I am not personally against technical analysis. I actually think parts of it if used correctly are very useful. 

For me personally, I use technical analysis on a basic level. I want to identify directional trends by following the price action and look at divergences. Now for me when prices start moving in one direction then they are 'more likely' to continue in that direction than to change direction or reverse. I say 'more likely' but this will not be the case on many examples and I accept that. Now for me when I look at the charts, I look at certain indicators like 'Moving Averages' then it is just a way for me to visualise this. That is what technical analysis is to me and how I use it on a basic level. 

A lot of traders will use Fibonacci retracements. Now to me price will fall back but the majority of them will not fall back on the precise Fibonacci retracement levels. Yes it is important to be aware of numerous different indicators and signals that are within the 'Technical Analysis Universe' but one must understand how to use them effectively and more importantly why they may help.

Another one is the famous Elliot Wave Theory. I am not against the Elliot Wave theory nor am I against anyone who uses it. I mean if only it were that easy. Everything moves in a formation of five waves and down in three waves. If you can see where you are in the wave formation then you can work out the future price action and when price will change direction. If on the off chance you get it wrong then you can always explain it in a complex way about other wave formations.

I use trend following principles and there are many flaws, issues and problems with trend following like there is with all different trading styles and methodologies. 

To offer a balanced argument the very trend following principles that I have adopted and used originate from technical analysis. So I am not against technical analysis. I just think there are many traders out there who may fail to understand the complexities of technical analysis, cannot appreciate it, cannot effectively use it, misunderstand when to use it and what for and this leads to 'trading chaos'. 

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Trend Following has its disadvantages. There is no doubt about that. For me using such principles you will never enter the trade at the lowest price and you will never enter the trade at its highest price so you can never achieve the greatest profits. Other trading strategies may be better for this type of aim. What trend following will allow is to capture the middle part or the bulk of the trend. 

Another disadvantage is that if you follow rules with discipline then you can be sucked into entering trades at times which reverse quickly leading to small losses or even attract you towards false breakouts. These are more harder to avoid than one may think if you are following a rules based entry and exit trading system. This is why I tend to focus on the strongest trending assets to put the odds and probability in my favour.

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Guest TF et al.

Yes the main problem with trend following like ALL these other trading ideas is that they never work! The vast bulk of the time the market is NOT I repeat NOT trending. This is for people who like....pottering along...in the world of trading.  TF is akin to investing and the like. BUT whatever you do it NEVER works. 

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Dear Guest TF et al.

You state that the main problem with trend following like all other trading ideas is that they never work. I must politely disagree with you on this. It is about trading those markets that are trending and if they are not then not trending them. Where trend following does not work is where traders try to trend follow markets which are not trending. 

I have been following trend following principles for many years now and it seems to work for me otherwise I simply would not be applying those principles. It could be that it has not worked for you or other traders because it has been applied incorrectly. 

It is now always the fault of the trading strategy but more likely the trader who is trying to apply the strategy. 

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Elliott Wave Theory & Trend Following - Why I personally don't use EWT:

I touched on 'Elliott Wave Theory' (EWT) in my post on this thread on 24th July 2019. I received two messages from two different people asking a similar question in why I do not think it would be useful to implement EWT in my trading. I have nothing against the theory in such and I am by no means an expert technician in it. I just have some fundamental issues with it in terms of its ability to consistently provide accurate forecasts of price action. Yes when it first was developed in those times (era) it may have been both useful and the percentage of identifying and entering profitable trades using it may have been higher.

Is there any statistical evidence from credible sources to suggest it is still the case now in 2019 or even last year in 2018?

I have two real issues with using EWT in my Trend Following strategy (though I must make it absolutely clear that Trend Following does not require the use of EWT and nor does my trading strategy):

  • The first is how can one consistently identify when EWT begins and the second is when EWT ends. I find that if one is wrong they can merely bring in sub waves and complex wave structures that many will simply not understand net alone be able to make accurate and effective trading decisions from them. 

Now just because I find it difficult to identify at times the start and end of EWT does not mean it cannot work or cannot be successful. It is that I personally am unable to effectively use it to make trading decisions from which to achieve consistent profits. It may be an issue with my trading skill set or it could be that EWT is not as effective as how it is sold and presented via the media. 

I think you could literally fit EWT into any chart for any asset as prices go up and down and so there are always going to be waves on charts. Another issue I have with EWT is that you recognise it after it has passed but when you are making trading decisions you are merely forecasting an assumption of future price direction. I am not trying to be disrespectful to those who use it and use it successfully. It may be a flaw in my own trading ability to be able to use it effectively. Prices move in waves. We all know that and we all can see that on different timeframes in the charts we view. For me EWT is about price moving in a direction (trend) which is followed by corrections / drops. 

Now the unique thing about EWT is the retracement of 'Wave B' which is less than the '5th Sub Wave'. Yes that is right the 5th Sub Wave. EWT can be difficult and technical which is why one needs to master it and I am by no means a master of it at all. I think EWT is great at looking and analysing historical price behaviour but I am not so sure how accurate it can be used to predict, forecast or assume future price action so that one can use it to make effective trading decision? Otherwise what is the point?

For me the million dollar question is how can one use EWT effectively to make trading decisions that lead to consistent profits? I can absolutely see how it can be used to explain historical price action but I am not so sure how one can effectively use it to make trading decisions. I have not even mentioned Fibonacci retracement but that is another topic altogether. 

I do not use EWT as firstly there is no need for me to do so in my trend following strategy but more importantly it is not something I have mastered or I am an expert in so I would not be able to apply it successfully and effectively within my trading. If I want to hold on to my winners and cut my losses short then EWT is not something that I feel I need to use. If I want to identify the strongest trends as early as possible and trade them for as long as possible then again EWT is nothing something that I need to use. It does not fit my personal trading strategy or trading system.

I can however see 'Swing Traders' being able to make more use of EWT as the price swings from one direction to another in the wave structure one could try and anticipate future movements based on EWT but there is no guarantee that the price will react in such a way.

For me it comes down to odds and probability when trading trends and the direction I think the price will take. Trading trends can be as simple or as difficult as we want to make it. Our returns are not judged on how easy or complex our trading system is but how much profit we make per annum on a consistent basis. That is the real and true measurement of successful trading. Making as much profit as possible on a consistent basis year after year and making as much profit as possible after losses have been taken into account. 

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    naimat
    Joined 25/08/19 10:34
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    • yes @TrendFollower, there are plenty of long term investors with IG and it's right they should take notice and plan well ahead for any eventuality but traders should be thinking differently and look to be responsive to changes in market conditions. As in my previous post the big indices always look a bit toppy and it's too easy to get in short too soon. Back in 2016 there was talk of impending recession for most of the year and many new traders blew their accounts continually shorting the market trying to 'catch the big one', the get rich quick trade. It was depressing to watch.  Here's another interesting chart of S&P seasonal pattern of average return 1990-2018 suggesting uncertainty in the short term before resumption upward.
    • @Caseynotes, One must remember that on average it can take around 18 months from when the treasury yield curve flips or inverts to the start of a recession.  People talk about Dr. Copper but another commodity that it is worth keeping an eye on is Lumber. When housing construction begins to drop then that can be one of many indicators to have a look at. Others are inflation, interest rate direction, wage growth, unemployment, etc. There are many well documents indicators which signal a potential recession is around the corner.  From a trading perspective one should not worry as long as one is comfortable shorting. Those who are not may struggle to consistently make enough profits during a recessionary period. 
    • @Caseynotes, Yes that is right. I have seen some calling the recession for the past two to three years! They have been calling it as if it is around the corner. Then when it does not come they move the goal posts via obscure technical analysis. When one challenges it, one is deemed negative or a naysayer.  Corrections happen large and small. Investors sell investments to take profits. This has been happening since the markets began. Prices go up and down. Prices are bullish and bearish. Of course trading sentiment plays a big part but for me following the price action and letting the price action lead you to a trading decision is key. Trying to wait for the price action to follow your view and then changing the narrative by giving technical reasoning when it does not follow your view in my opinion will lead to missing out on trading opportunities.  For a sound trader, recessions, should not be feared but welcomed. If one understands how prices react during recessions then one can prepare their trading strategy for this outcome but for when it happens and not before.   
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