The secrets of trend trading
Is there a secret to trading or are there even many secrets? Or is there no secret at all? Naturally this is a difficult question. If the answer were known, the question wouldn't deal with secrets. So, we have here a conundrum without a definitive answer. It is more a question with various viewpoints as possible answers.
The trend itself is the secret
This idea is not surprising for a trend trading system site. Still, it has its reasons. A trend shows that there is something going on. That's better than speculating that there will be something going on. The trend itself may be the indicator, signal or alert for a deeper reason. The trend suggests that it may offer the fastest appreciation of your capital.
Trading at the high
Trend trading done right enters a trend that is currently running. A trend at a high is running. At least more likely than a trend pulling back. This is the most difficult part for many. It requires the trader to act against the primitive instincts that we all internalized, namely buying cheap.
Using the stop loss method
Complementing the idea of trading at the high is using a stop loss. Trends can easily reverse and without a stop the trader gets the full potential of the trend, unfortunately with the wrong sign. But the stop loss system means more for trend trading. It is the single most simple and robust trend trading system there is. If you are stopped out, the trend has come to an end. If not, the trend is still running. That is a trading mechanism, which inherently has the rocket built in, probabilistically of course.
Tuning the system
Trend trading at the high with a risk limiting stop loss system is not as easy as it sounds. Even not for an emotionless robot. A price at a high may also indicate potential for a temporary pullback. Trading is difficult. The devil is in the details. There is no simple road for all. A trader needs a sophisticated trading system. It should be as simple as possible. But it won't be simple. You are searching for the perfect trend trading system? Trading is an art! Comply to this uncomfortable wisdom and you may have a chance.
The deeper reason
A running trend is telling you something. The market has so far constantly underestimated the potential of the move. But trends are different. At this point the idea of Trend Sigma was born. The symbol Sigma is often used for volatility, validity, and quality. It is a scientific symbol, but you can also think of it as positive energy. For Trend Sigma it has a special meaning. It is not just any trend, but the meaningful trend that is interesting. A trend should be powerful and smooth, but most importantly it should have a reason that can be interpreted. The higher the Sigma of the trend is, the more the odds are bent in favor of the investor.
The real trader
So much about abstract ideas. Here are some pointers to zero in on the real secret:
The stock market secret - If you are an investor in stocks, read this. After you have done so, you will be on your way to become a fine trader.
Sigma trends - This is what gave Trend Sigma its name: What is a meaningful trend and how to find one.
The simple trend system - The basic start. It is impossible to nail the best trading system, but there are some better and many worse ones. Important is that a system is simple. Only then can it be among the better ones.
Trend System LX is our multiplatform shell that is thought for running trading software of all kinds virtualized. Especially is the heightened security for order entry systems and broker trading platform software useful. General chart analyzing or portfolio software that runs only under Windows can with Trend System LX be tried under Mac OS and Linux, the two OSes that are neglected by trading software developers.
Special trading systems - If you search something that really works for you, start with the simple system above and go ahead with the system collection from Tau. These strange systems are recommended for extending your view on what is possible. They are recommended for any investor trading the Trend Sigma style, which means combining trend with potential in some way. There are over hundred systems, ranging from penny stocks to large cap stocks, and from Forex to futures.
Why so many? There is no such thing as the perfect system. Also, markets are changing, at least in the details of price behavior. Trading is also evolution and every trader should have an open mind.
Many don't have a real system at all and those who think they have should constantly rethink what they are doing. We don't mean to second guess the current trading action that your system dictates. That would be lack of discipline. It is the system itself that is questionable, principally. Thus browsing trading system ideas ranging from robust to far fetched may pay off. Enjoy the journey, at times it is also fun.
"Trend trading is an art" means also a trading system must be appropriate for you. Right, it has been said already and it doesn't sound like a secret, but the more you believe this simple thing, the greater your trading success will be. In other words, you have to find your system and then you have to optimize it.
Here are just two examples how different trading systems can be. Trend trading may mean:
- to combine entry and exit automation by a trading software with the right trend selection by you, or the other way round,
- getting the trading idea from elsewhere, a computer algorithm or a special site like Tau, and entering the trend with a tight stop by means of manual day trading.
May the gods of riding the trend beast be with you.
If they haven't been so far, follow the Zen
and search for meaningful trends