Although the topic is called medium and long-term trend trading, in fact, there is a trend in any cycle.
Small cycle trends are difficult to do because they are too easily disturbed. A glitch on the daily chart, on the 5-minute cycle chart, may be an earth-shaking earthquake.
How to do trend trading, this article will share with you some solutions to common problems.
After entering the market on the right side, because the price has been running along the trend for a while, it will soon face a callback.
The "right side entry" mentioned in the article, what is the right side? Trading on the right side refers to buying after the price has a periodic bottom and selling after a periodic top, without the need to predict when the top and bottom will occur. It will appear that trading on the right side is also called the right hemisphere theory, which is to follow the trend, never operate against the trend, and never predict the future.
When this happens, the psychological development model of normal people is:
Inexperienced people will panic at this time, stop the loss in a hurry, and then watch the price rush away along the original trend. This is "slapped on both sides". If this happens several times, he will give up trend trading and turn to bottom hunting.
For those with a little experience:
At this time, you will think of "carrying", as long as you survive the darkness before dawn, the light is ahead. However, if the pullback happens to turn into a reversal, by the time you wake up, the floating loss is already too large, and you are reluctant to stop the loss, and you can't find other solutions. After hesitating, trend trading becomes "carrying on to the end".
After the initial dark correction period, the price moved forward smoothly along the original trend, and how to get out of the market became a problem again.
Some people will set a fixed stop profit, such as 100 points, 200 points, etc. If the stop profit is smooth, everyone will be happy. Then he looked at the 500 points behind Hurricane and comforted himself: "After all, you have already got 100 (200) points, haven't you?"
If you don’t take profit smoothly, when you reach 99 points, you pull back, carry it, and reverse it. Seeing that the profit at 99 points turns into a loss, your mood will fall from heaven to hell, and you may face loss of control later.
Someone who does not set a fixed stop profit and wants to enter the market at the highest (low) point will unknowingly fall into the idea of hunting for the bottom and finding the top.
Trend trading, in my understanding at this stage, should be a fool's trading, that is, as the saying goes, "Looking at the mountain is a mountain, and looking at the water is water".
Imagine, when we see a mountain in our daily life, will we suspect that our eyes are wrong? Do you want to analyze, under what conditions is a mountain, and under what conditions is water?
Normally it shouldn't. Unless it is in an extreme environment such as a desert or an alien planet.
Judging the trend is also so simple.
Therefore, the key to the problem is not how to judge the trend, but how to operate after the trend is judged.
The usual way is to judge the major trend, and then wait for the momentum of the minor trend to pull back, and then enter the market according to the major trend.
Has anyone ever thought that the essence of this approach is still "buying the bottom and finding the top". Because the cost of entering the market after the trend is formed is usually relatively high, which conflicts with the psychological model of normal people I mentioned earlier (smart people buy cheap goods).
Trend trading originally only needs to judge the trend. According to the above method, in fact, it is necessary to judge the top and bottom of the small trend. This is a highly complicated project, which involves many technical and fundamental factors.
This is completely contrary to what I understand as trading for fools.
People who think they are smart can leave now.
If you are willing to be a happy fool, please read on.
Real trend trading, no analysis, no forecast, just follow. If the trend is upward, go long on the spot. The trend is down, short on the spot. What should I do if the trend reverses after entering the market? Follow up on the spot.
A trend is like a path in a dense fog, which may not be visible ten meters away. So what does it matter? You just have to be able to see where you're going. As long as you keep your feet on the ground and move forward step by step, you will surely reach your destination.
Worried about the callback after entry? If you really believe in trends, you won't have such worries.
Just open a chart above the daily line level, which trend will not go out of hundreds or thousands of points or thousands of points? Compared with the real trend, the pullback of only a few dozen points is worth worrying about?
Worried about a pullback turning into a reversal? Just keep up.
Repeat again, real trend trading, no analysis, no prediction, just follow.
"Following" is unconditional, and has nothing to do with whether you have an order in your hand, or whether the order is profitable or losing.
Worried about not being able to hold the list? This is indeed a big problem.
The following statement may be somewhat deviant.
If you enter the market due to a certain condition; then, you can only exit the market when the opposite condition occurs; otherwise, you will always hold the position.
Entering and exiting are essentially the same thing, but in opposite directions.
If you can't figure this out, it will become an unattainable thing to hold the list.
After you figure it out, you don't need to think about stop loss or stop win. Because the stop loss or stop win is nothing more than the entry of the list in hand.
The above are all concepts, and for specific operations, I recommend using the moving average. This is the most orthodox trend indicator, and it is enough. There is no need to look for the Holy Grail everywhere.
Talk about the operating concept:
1. Emphasis on potential rather than price
Ignore price fluctuations and focus on momentum development and evolution.
Many people don't know the difference between price fluctuations and the evolution of trends. What they want in their minds is to follow the general trend, but they are often out of the game by small-cycle price fluctuations.
There is an easy way.
Open a cycle of charts arbitrarily, regard the vertical change (that is, the change of a single K-line itself) as the price fluctuation, and regard the horizontal change (that is, the graph of all the K-lines) as the evolution of the potential.
Ignoring price fluctuations means ignoring the changes in a single K-line itself and focusing on the horizontal evolution of the K-line.
As for how to judge the trend according to the arrangement of the K-line, some people are masters of naked K-lines. To be honest, I don’t think it is very reliable. My suggestion is to use the moving average.
When the short-term moving average is above the long-term moving average, it is bullish; when the short-term moving average is below the long-term moving average, it is short.
A single moving average is also acceptable, but it will be tortured by shocks. In the end, other conditions must be added for filtering, which is not as simple and reliable as multiple moving averages.
The above is the judgment of the situation, which is actually the simplest, and people with normal eyes can do it. The real problem is to judge the operation after the trend.
My approach is: after the trend changes, enter the market as soon as possible, and hold the position until the trend reverses.
(1) "After the trend changes": The focus is on "after", that is, "seeing with my own eyes" that the short-term moving average is above (below) the long-term moving average, rather than judging based on technical or fundamental factors, the future short-term moving average "may "Above (below) the long-term moving average.
(2) "Enter the market at the first time": The focus is on "the first time", that is to say, when the short-term moving average is above (below) the long-term moving average, go long (short) "immediately" instead of waiting for a callback to a better price.
(3) "Position to trend reversal": The focus is on "trend reversal". For example, if you see that the short-term moving average is above the long-term moving average, if you go long, then only when the short-term moving average goes below the long-term moving average (it must be seen with your own eyes, and cannot be judged based on other conditions), the long order will enter the market, which is different from the profit of the order itself. or loss does not matter.
2. Overall view
When making an order, we should not have the idea of taking a gamble. What we want is long-term and stable profits, not running away after winning.
It is normal to be caught by following the homeopathic strategy. As long as the trend remains unchanged, hold positions firmly.
Under the premise of entering the market with the trend, the overall risk of the account is very small.
3. Respond to all changes with the same – the uncertainty of the market and the certainty of operation
Everyone understands the uncertainty of the market.
Since the market is uncertain, why do operations need certainty?
The core of homeopathic operation lies in "following the trend", which is what I call the certainty of operation. As long as you always follow the current trend, you will never lose the future trend.
I gave an example earlier: the trend is like a path in the thick fog, which may not be clearly seen ten meters away. So what does it matter? You just have to be able to see where you're going. As long as you keep your feet on the ground and move forward step by step, you will surely reach your destination.
4. About stop loss/take profit
Stop loss and stop profit are essentially predicting the market.
A stop loss of 100 points means that the price will pull back 100 points, and the trend will reverse.
A stop win of 100 points means that the price runs 100 points along the trend, and the trend ends.
On the one hand, this kind of thinking is predicting the market, and on the other hand, it focuses on the price, which is the vertical change on the chart I mentioned earlier.
The most difficult part of trading with the trend is neither judging the trend nor entering the market.
The most difficult thing is getting out. Although for any transaction, exits are critical. But for trend-following trading, you usually can't get a good price when you enter the market. If you don't do well when you get out of the market, it is very likely that your efforts will be in vain, or even a loss.
"Hold positions until the trend reverses", it is easy to say, but how to judge the trend reverse?
Many people will analyze technical and fundamental factors in detail, unknowingly go astray in predicting the future and finding the bottom, but forget the essence of trend-following trading - following the trend.
When entering the market, follow the trend. When entering the market, it is also following the trend, but in the opposite direction.
Reversing the trend at the time of entry is a trend reversal. Or to put it another way: if an entry is due to a certain condition, then inverting that condition is the condition for exit.
It's that simple.
Many people take it for granted that the "potential" in Homeopathic refers to the future trend. So they racked their brains to analyze the market, trying to grasp the future trend, but they forgot that the cornerstone of trend theory lies in the continuity of the trend. The future trend is a continuation of the current trend, not created out of thin air.
So, following the trend is actually following the current trend. As long as you always follow the current trend, you will never lose the future trend.
To judge the current trend, you only need to look at it with your eyes. And to judge the future trend? Hehe (no numbers are omitted below).
What I said above are basically ideas, that is, "Tao". The following is the method of operation, which is the "skill"
operation method
1. Determine the "operating cycle"
It is meaningless to talk about transactions outside the cycle.
No matter trend trading, or bottom-hunting and top-hunting, it is inseparable from a specific cycle. On the charts of different periods, the trend may be completely opposite. The daily line is rising like a rainbow, the weekly line may have fallen several times, the monthly line may be a head-and-shoulders bottom, and the annual line may be halfway up the mountain.
The cycle should not be too short. Although there are trends in small cycles, they are too easily disturbed.
It doesn't work if the cycle is too large. Just like an amateur sprinter takes Liu Xiang as his goal, it is difficult to stick to it.
For most people, 4 hours is a more suitable operation period, and the trend is relatively stable. It is also easier to do it once every 4 hours.
The most important principle in determining the cycle is to suit yourself.
If you are very busy at work and don't have much time to watch the market during the day, then the daily line is the most suitable. Just look at the disk every morning before going to work.
If you are a full-time trader, 4 hours to the daily line and weekly line are all possible. It takes 4 hours for the initial stage. When the funds and experience have accumulated to a certain level, if you want to relax, you can change it to a larger cycle.
2. Determine the "trend judgment rules"
Although I have always said that judging the trend is very simple, just look at it with your eyes. But in actual trading, this cannot be done, because the entry point cannot be determined, and other conditions will inevitably be added, resulting in the complexity of the operation.
There must be a clear, simple and feasible rule. As long as this rule is met, the order will be placed without considering other conditions.
The rules must be reversible, that is, the rules for bulls and bears are the same, just in opposite directions.
The rules cannot include price factors, because price fluctuations do not necessarily lead to a change in the trend, and you cannot enter the market if the trend does not change.
The rules themselves must contain enough information to deduce a change in trend.
The most classic rule is the crossing of moving averages, with many golden crosses and empty dead crosses.
In actual trading, in addition to the trend judgment rules of the operating cycle, it is best to add a large cycle, which can filter out most of the shocks. Simply put, it is to enter the market when the trend of the two cycles is consistent.
One thing to pay attention to, don't regard the trend as your wife, just cling to it after you confirm it, and never leave it.
The trend should be regarded as a lover, and when you get old and faded, you should discard it in time and replace it with a new one.
The reason is that trends change. Although I have always emphasized the continuation of the trend, no matter how strong the trend is, there will be an end when the trend reverses, so we must keep up with it in time, and don't look for one direction and not turn back.
3. Determine "whether to hedge"
It is normal to be trapped after taking advantage of the trend. How to deal with this kind of loss order?
(1) Conservative type: After the trend reverses, all existing orders, regardless of profit or loss, will be closed. Then enter the market according to the new trend.
(2) Risk-taking type: After the trend reverses, only the winning orders will be closed for the existing orders, and the losing orders will not be moved. Then enter the market according to the new trend, and form a hedge with the original loss order.
The above two methods have their own advantages and disadvantages, just remember that benefits and risks come at the same time.
My suggestion is "adventurous type". Because the fund management model I suggested earlier is a very conservative 1 times actual leverage, in this case, if a conservative liquidation method is adopted, the capital utilization efficiency will be very low, and correspondingly, there will be very few profit opportunities. If high leverage is used in the fund management model, then the conservative type should be considered here.
It should be noted that hedging should not be done deliberately. Don't consciously hedge to stop losses or keep profits, that's a dead end. As explained above, hedging is the result of entering the market according to the trend, not to prevent the expansion of losses, but because the trend has reversed, and we follow the rules to follow the trend. Don't think about unlocking after the hedge is formed, it is a trap. Completely discard the thinking of hedging and unlocking, treat it as an ordinary list, adhere to the established rules, enter the market when it is time to enter, and exit the market when it is time to get out, just like hedging does not exist. Just treat the stop loss effect brought by hedging as a windfall.
have to be aware of is:
1. The principle of determining the operating cycle is to suit yourself, not the market
After setting the operation cycle, if there is no major change in your work/life status, don't change the cycle easily. Don't look at which cycle has a market, just do which cycle.
I was working hard on the daily line, but when I saw the market on the hourly chart, my hands were itchy for a while, I placed an order, and I was caught, and then I was restless all day, so I had to squeeze time to watch the market, and the normal work/life order was completely disrupted chaos, the result is usually tragedy.
2. Refueling tactics are taboo
Some people are too cautious and dare not put a lot of money in their accounts, tens or hundreds of dollars, but when trading, they are bold and greedy, and they dare to make a move with a few hundred dollars, and the result is violent. Cycle between positions and deposits. Although the money lost each time is not much, the accumulation is also a large number. It was only when the savings were almost exhausted that I suddenly realized that if I had put more principal and smaller positions, I would have made a profit long ago! ! !
A popular belief is that if small funds cannot make money, large funds cannot make money either. There is some truth to this view, but it only sees one side of the problem. Another aspect of the problem is the influence of human psychological factors on operation. With a principal of 100,000 and earning 100% every year, which is equivalent to the annual income of an ordinary white-collar worker in a big city, he can at least survive. If it is 10,000 principal, the same operation method can earn 100% every year, even the living expenses are not enough, and few people can stick to it. At this time, the dark side of human nature will start to move around. Seeing others turning over several times a week (mostly hearsay), thinking that you are not stupid than others, why stick to the goal of 100% for a year? So I started to increase my position, started to gamble on data, and started to search for bottoms and tops, and the operation was deformed.
3. Judging the trend, the biggest misunderstanding is that many people think that they want to judge the future trend
If you think about it carefully, you will understand that such "following the trend" and buying the bottom against the trend are essentially the same.
People who hunt for the top are not deliberately going against the trend, but they believe that the trend is about to reverse, and entering the market ahead of time against the trend is just to obtain a more favorable entry point. When the trend reverses, the original counter-trend becomes a trend-following trend.
It can be seen that the purpose of hunting for the top is to follow the trend of the future. If you do trend trading, if you also judge the future trend, you will actually go astray in finding the bottom and finding the top.
4. The weakness of the trend system lies in consolidation. How to solve this problem?
In my opinion, there is no need to address it.
Think about this question with the simplest logic.
When the market goes unilaterally, you use the trend system to make money. If you solve the above problems, you will also make money when the market is consolidating. Trends make money, and consolidation also makes money. Is this possible? Or can it be considered as a starting point for long-term stable profitability?
Some people may think that when the market is unilateral, use the trend system; when it is consolidating, buy the bottom and find the top. This is essentially the same thing as the previous idea. Accurately judging trends and corrections is beyond the scope of human civilization at this stage, which is the domain of gods.
Therefore, the trend system is to make money in the trend stage. When the market is consolidating, it is very normal for funds to stagnate or even retreat.
5. Treat all fluctuations as trends
Dividing the market into unilateral and consolidation does not mean analyzing the market.
Trends and consolidations can only be seen in hindsight. Therefore, I think that "regarding all fluctuations as trends" is a very important operational thinking, although it seems a bit deviant.
If you don't regard all fluctuations as trends, you must judge which fluctuations are trends and which fluctuations are consolidation, and then take corresponding countermeasures. This will fall into the astray of analyzing the market again.
It may seem silly to regard all fluctuations as trends, but in this way, the fog in front of you will be swept away, and all operations are very clear, just follow the trend.
Let me give you another example of the path in the thick fog. You can’t see clearly from ten meters away. The path itself is also winding, and sometimes you even turn back, but the path under your feet is very clear. There are guardrails on both sides, which is very safe. , as long as you walk forward step by step on the small road, although it took a lot of time, you arrived at the destination very smoothly.
And some smart people like to take shortcuts, trying to pass through the dense fog, but the result is that they either fall off the cliff, or are eaten by ferocious beasts, or fall black and blue, and their bodies are bruised.
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