Let it go

Many systems trade a trend. That is they are trend breakout methods. But there is a glitch with this. No matter what timeframe we observe the market is in a range for most of the time.

Ranging market

I’ve read that 80% of the market cycle is ranging. And this can be more or less confirmed with a brief observation of a broad section of one’s charts.

To, therefore, aim for a ‘trend’ dependent system is to spend much of the time sitting watching. It’s worse than this because it is difficult to determine if the price is in a range or the early stages of a trend. It is only apparent once the day, week or month – depending on our chosen timeframe – is well underway or completed.

Trending market

Moreover, a discipline that works well in a trend may not work so well when a market is ranging and vice versa. So what is the answer? My view is that as the market spends most of its time in a range, I’d like a procedure that works consistently well in that environment.

When I get to the occasional trend – as long as I stick to my methodology – my account shouldn’t come to too much harm and as long as I can withstand the frustration that being out of a trend generates I’ll be fine and remain ready to do battle when (all too soon) the range starts again.

The secret here is sticking to our methodology. It is very tempting – and we have all done it – to alter how we trade to try to fit in with the new and dynamic looking trend. For the range based trader there is only one thing for it when the big move hits, let it go.

Unless I can successfully combine the tight and wide stop strategies. This, I consider, is only recently possible with the introduction of a technical software update known as ‘auto qty’. I will trial this over the next few weeks and report back.

Published by Day Trader

I flew fast jets for 30 years of my life. I've traded full-time, more or less, for the last ten years, initially from fundamentals and over the last few years as a dedicated day trader. I live on the North Norfolk coast.

Leave a comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: