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Saturday, February 23, 2013

TRADING WITH THE TREND




This may seem to be a very simple chart and it is by design. I want readers to notice that the big money was made trading in conjunction with the trends. I think many of us myself included look at a chart and are immediately drawn to the peaks and troughs. If we could only sell at the peaks and buy at the troughs life would be good. We then dedicate years to trying to find ways of doing this effectively. At the end of the those years we have nothing to show for our hard work.

This is not to say that you can't ever trade against a trend, but it does show that for the most part the big money is made trading in sync with it. In the Newsletter we have shown some good simple techniques for trend identification that work quite well. In general the more fancy you make things the more you run the risk of data mining the technique and condemning it to fail in real time. I have made that mistake countless times over the years. Newsletter readers, stick by those techniques, they do work.

Over the weekend people tend to find a few hours here and there to surf the web and catch up on what happened during the week, I also tend to do this. Whenever I do this I always come across in depth articles of theories on why something should go up or down. I cannot for the life of me imagine trying to trade Gold by trying to assess whether or not central banks are messing around with the values, propping or depressing it illegally. I also can't imagine creating these convoluted streams of logic as to what is going to happen with the dollar, the deficit, etcc.. If you are a trader do not read this stuff. If you are just perusing and don't care about being right or wrong but want to be able to combat the local snot nose punk at the company water cooler, have at it. On the other hand you could read a book on back fist techniques and just give him one, up to you I suppose. I think readers know which way I would go on this one.

The point is that the real driver of price is the trend. The implosion in the metals is no surprise because the trend is down and has been. The big moves happen in direction of the underlying trend. Yes we do have crashes out of the blue and it is nice to be able to catch them. However, have you ever considered how many moves you miss trying to catch big reversals? I personally have missed a ton of them by doing that and I bet you have too.

The lesson, don't do it. Trade with the trends and use stops to protect you against the big crashes. Let the wise guys like me try and do that stuff.

The new web site is getting close, now it is a matter of what I can manage time wise to put in it. I am deciding this right now. As much as I would love to do a chat room, it is a complex under taking and probably not going to happen initially. We are going to have a members section which is going to be separate from the services, that will have good new content. It will probably be $10 a month or something cheap like that to get access to that area. Within that area is where a chat and or trading room will eventually spring up. If anyone has any suggestions of what would help them the most on a daily basis please email me.

Good Trading

1 comment:

John M said...

This is a great post. For years, I've been trying to pick tops and bottoms and it's a very hard habit to break. Even when I think I have, I discover that, no, actually, I didn't.

The ability to keep anything simple is a discipline difficult to, but well worth, learning. I've learned that in my work, my hobbies and, as much as it can be kept simple, my life overall.

Keep preaching the good advice. Some of us need the reinforcement, at least I do. Thanks, Chris.