Trends

BarroMetrics Views: Trends

Yesterday, I was having a conversation with a fellow trader:

I said: “How has it been going?”

The replied: “The FX Markets have been trending, so I have been doing well!”

Coming from the mouth of a competent-successful trader, I’d accept the words at face value; but, if the words come from a novice-less successful trader, I’d say that the words mask an erroneous assumption. And, that erroneous assumption, can lead to trading losses.

So, let me put it to you, what might be the erroneous assumption behind the words? First three correct answers wins a copy of the original:

The Richard D Wyckoff Method of Trading and Investing in Stocks

If you check the link, you’ll find that the course sell for US$250.00 even though copyright has expired.

What if there are no correct answers? Then, the first three posted replies win the prize.

By the way, do not send posts to my email address. Only answers posted here qualify. Competition closes 9:00 am HKST.

16 thoughts on “Trends”

  1. Hi Ray… To me, the erroneous assumption might telling people if the market’s having correction, reversal or ranging couldn’t make profit, except only trending market. To earn from trading it can be many ways, but it must be consistent and be discipline. Ultimately, one of most important things is the money management. (Looking forward the correct answer from you)

  2. Hi Ray,

    At risk of being the first and looking foolish my answer to the posed question. My answer:

    The “Trending” in the traders timeframe is the same as the trend in the higher timeframe, and not simply part of a higher timeframe correction.

    Thanks again for the blog, my #1 daily read 🙂

  3. I think the assumption is the market will keep the trend. It is implying “I have a big unrealized profit in the market, and I am going to make more if the trend does not change”.

  4. The erroneous assumption is that:

    No matter the current state of the market (trend, sideways) I always trade the same. Same frequencey, same position size etc.

  5. Or to put it better:

    I don’t have to adapt my strategy to current market conditions because soon it will trend well and I’m gonna profit again.

  6. Hi Ray,

    The 3 earlier comments have already pointed out the obvious erroneous assumption that one can only make money in a trending market. There are many traders who make money from adopting a “mean reversion” approach, when such is appropriate.

    Let me, however, point out another underlying fallacy: that even for traders who are strictly trend followers, a non-trending FX market prevents profitable trades in other markets. A truly successful trader should be able to trade in at least a few different markets.

    Best, Art

  7. Hi Ray, the opposite would be not trending and not doing well.
    assumption that high win rate required which would only happen during trending.
    cheers baz

  8. 1) Maybe no connection between the trader’s “method” over time and the his short term result. Could just be luck. Articles have been written on this. Even can be true for some famous long term managers in that they happened to start out at a time when the markets suited their style.

    2) Trader might just be in flow stage.

    3) Trader may have only one trade on (for example) and may have caught a good move. A sample of a few trades is meaningless. But of course they would say “I am doing well” 🙂

  9. I understanding is the assumption would be : you can only trade well in a trending market,you cannot trade well in a non-trending market.

  10. sorry last post sent by a mistake.

    my understanding is that the assumption could be : you can only trade well in a trending market,you cannot trade well in a non-trending market.

    But 80% of the time the market goes sideways, making false breakout.Only 20% of the time, it is trending. And you may not make money even it is trending.

  11. Wendy wrote:

    “my understanding is that the assumption could be : you can only trade well in a trending market,you cannot trade well in a non-trending market.

    But 80% of the time the market goes sideways, making false breakout.Only 20% of the time, it is trending. And you may not make money even it is trending.”

    I assume that she does not trade options.

    Option traders can make profits in:
    1. uptrend market
    2. downtrend market
    3. sideway market

    If 80% of the time the market goes sideways, she could learn from Thomas to sell options to collect premiums 80% of the time lah! 🙂

  12. If markets are trending I would use Ray’s stats to find out if the markets are overextended or not. If the markets are indeed overextended then i would tighten stops in accordance with my trading plan. Secondly, I would look for signs if there are signs of exhaustion at forecasted prices levels and longer term S/R levels.

  13. The assumption is that one’s state of mind is determined by the market. Emotional control and remaining centered is essential against the Market’s manic-depressive mood swings.

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