Is trend following a false proposition?

Topic, whether trend following is a false proposition, I don’t want to talk about this first. What I want to point out is that your question is actually a false proposition at all!

Why do you say this way? There are two reasons:

1. What happened to Stanley Crowe?

Stanley Crowe is a well-known "long-term trading master" and "trend trading master" in the Wall Street futures industry. He has published six futures monographs, and probably three of them are the most widely circulated in China. Futures Speculators", "Crow Talks about Futures Trading Strategies" in 1987, and "Crow Talks about Investment Strategies--The Magical Murphy's Law" around 1994.

Not only has he made great achievements in the field of writing, but he is also famous in investment transactions. Relying on the principle of trend trading, Stanley Crowe created a miracle of making a profit of 1 million US dollars with 18,000 US dollars in the rising commodity futures market in the early 1970s!

After becoming famous and successful, Stanley Crowe took the huge wealth he gained on Wall Street, away from this competitive market, roaming the world, enjoying his own life; finally he died of myocardial infarction in 1999 due to obesity.

Stanley Crowe's unrestrained attitude of "flicking his clothes away, hiding his body and fame" is consistent with Fan Li's state of boating on the West Lake after he retired from his career, and has always been admired by people; but here you use "Stan Leigh Crowe has disappeared" to comment, I don't know what it means.

2. Did Richard Dennis fail?

Richard Dennis is a master of trend trading, and thus created the turtle trading rules.

Such a powerful speculator is said to have suffered heavy losses in the 1987 stock market crash. At that time, his main position was in bonds. After the stock market crash, interest rates were lowered, and the trend of bonds skyrocketed. Although Richard Dennis had risk control, it would be difficult to stop for a while, so he suffered heavy losses. Then, in 1988, Richard Dennis announced that he would quit the speculative world and concentrate on politics.

The above paragraph is the story of Richard Dennis circulated on the Internet, and it should also be the source of the title "Richard Dennis went into politics after a huge loss", right?

This story is indeed close to ten, but where does the term "failure at a huge loss" come from? Did he fail? I didn't see it anyway.

First of all, we need to know, which year did the turtle experiment start? 1983. Historical data shows that in the following 4 years, the sea turtle trainees generally achieved an average annual compound interest rate of 80%. That said, in 1987, the Turtles were still making deals for Richard.

For this reason, I specially read "Turtle Trading Rules", which clearly stated as follows:

October 19, 1987, the legendary "Black Monday". Curtis (Richard's best Turtle member and the author of the book) was running a $20 million account for Richard to trade.

On the same day, he held short orders in euros and US dollars. At the same time, he held a large number of long orders in gold and silver, as well as several other foreign exchange varieties.

You must know that the trading method of the Turtles is always to follow the trend. Moreover, the turtle trading rules have the logic of increasing positions, and orders are placed according to the proportion of funds.

The biggest risk of the turtle trading rules, as I once said, is that when most of the underlying products they trade show signals at the same time, and just fill up their positions, and then a sharp reverse movement occurs, their retracement will Very big.

At this time, in fact, the first half of this incident happened. Curtis described in the article that he held a lot of orders in heavy positions.

And the next morning, when the market opened, the euros and dollars he was short jumped and opened sharply. And his bulls all opened sharply lower. The chart below shows the trend of the euro and dollar at that time:

There is no doubt that he must stop the loss, but because the gap is too large, all his positions are basically equivalent to suffering the maximum blow.

On this day, his $20 million account became $11 million.

He said in the article: "It was XXX who raised interest rates overnight without warning, and it hurt me badly."

Curtis has gone through this process, and it is estimated that Richard is also in the same situation. Therefore, as mentioned above, nearly half of the funds under its management have lost nearly half of the losses, which is just this wave of market prices.

In the book, Curtis showed their capital curve after this market wave, as shown in the figure below:

What's wrong with this funding curve? I don't think so. This is a normal small callback in the middle of the general trend going northeast! Those who said he failed, including the subject, how many of you can draw a 4-year fund curve with a better result than it?

This curve cannot explain his failure at all. Since then, Richard Dennis has gone into politics. This can only show that Richard Dennis started his new career after experiencing a small stop loss in his life; does this have anything to do with the failure of the trend trading method? Who stipulates that the trend can only go in one direction to the end, and cannot be carried out in a way of big rise and small return?

Questioner, your question "Is trend tracking a false proposition?" The two examples listed in this question are not valid, so your question is also a false question, so it is not worth answering.

Trend following is a point of view I personally agree with. I think there is trend following in the trading market.

Regarding the question of the subject, you may fall into a misunderstanding. If you don’t see it, it doesn’t mean you don’t have it. An example cannot represent the reality. If Stank Crowe and Sea Turtle Pie really failed, their books would not be circulated in the market. So, this is just an example.

Trend following is just a method and concept of our trading, and there is no absolute right or wrong in itself. Let's not say that the main source of profit for Buffett and his like comes from trends. From the analysis of our own situation and from the perspective of trading, why trend tracking is better than making small profits.

First, the trend market is the source of profit. The purpose of our trading is nothing more than to make money, not just to trade. The fundamental thing to make money is the huge price difference, from the low point of the trend to the high point of the trend. As for how many orders are made every day and how long each position is held, these are secondary. From the price difference point of view, the profit margin of the trend will be more than that of the small profit.

Second, the trend lasts for a long time after it is formed. Trading has never been based on huge profits but on time. Long-term traders are divided based on the length of time they hold positions and the length of the trading cycle. Holding positions for a long time may put a lot of pressure on your mentality, but you will not miss profits, such as the time period when you rest in the early morning, such as the time period when you are busy with other things. And more importantly, once a large-cycle trend is formed, it basically lasts for a very long time, and long-term holdings will basically not miss the big market, and will not interfere due to personal reasons.

Third, the operation difficulty of trend following is less than intraday betting for small profits. I remember when I first entered the market, I always wanted to trade, and I wanted to grab most of the profits in the market. But after the baptism of the market, it will pay more attention to risks. Every opening of a position is a risk, and frequent trading will inevitably lead to an increased probability of loss. From the perspective of trading frequency, the risk of trend following will be less than that of intraday trading.

To sum up, trend following is better than other methods in terms of profit margin and risk.

That's all I can think of for now...

I suspect that you may have never read Crowe's "Crow's Talking about Futures Strategies" and "Turtle Trading Rules" invented by Dennis and written by his disciples. I personally think that trend following is not fake. proposition, and quite possibly the only way to trade profitably.

Crowe himself likes freedom, just like many people who trade just want to improve their economic level, and don’t want to have to trade for a lifetime. People’s financial ability is enough to travel around the world and enjoy life. Is this a problem? And Dennis, every time someone says that he gave up the Turtle trade to go into politics after a huge loss, I want to laugh. Do you guys really understand the Turtle Trading Rules? First of all, Dennis's big loss this time was due to the euro's interest rate adjustment without any warning, which caused the account to shrink roughly, with a retracement of more than 50%. But according to the turtle trading rules, this is a very normal thing. The turtle trading method is to break through and enter the market, and then increase the position three times according to the ATR. Reverse, what do you mean? That is, when he just filled up his position, the market reversed, and all four orders lost money, but in fact he had stop loss control. Logically speaking, even if he did so, he shouldn’t lose such a big loss, but the market at that time was too fierce. , A huge slippage occurred during the stop loss transaction, which led to such a large retracement. but! In this way, the Turtle Trading Rule is still a world-class top trading system. Curtis Firth wrote this experience just to let people have a full understanding of the disadvantages of a trading system, but most of them interpreted the Turtle Trading System because of this. Not at all, so ah, some people are destined to be just leeks.

In fact, it is not only the two masters mentioned by the subject, but also others including Livermore, who is also a master of trend trading. Since he ended up committing suicide by drinking a bullet, many people think that he was the result of a failed transaction. My heart was broken, so I concluded that Livermore's trend trading was not good. Livermore's real suicide was due to the outbreak of depression caused by family reasons. He really likes to squander. The money from trading may not be much left, but he has a fixed fund of five million. What was the concept of a five million fund in the 1930s and 1940s? It is equivalent to the current 500 million fund, and that is a fund! It can make money, and Livermore would have to work hard to squander it all. And think about it with your brain, a person who can go through three bankruptcies and stand up again, even if the transaction loses money, is it a problem for him? Just like Chu Shijian, is it a matter of being hit again and again? With a certain strength, it is normal to rise again.

People always like to listen to some tragic stories to comfort themselves from the fact that they are not motivated. And those seemingly tragic things actually have their own reasons.

Let me talk about trend following again. I said earlier in the article that trend following may be the only way to make a profit. In fact, many people here may think that I am too absolute. Trading should be an all-encompassing field, and even a field where a hundred flowers bloom. It should seek common ground while reserving differences. But we can take a closer look. The Daconghua, classics, and those that have been circulated all the time tell us to follow the trend. Livermore, Dow Jones, and Dennis, Crowe, Munger, Soros and others all pass on the importance of this trend trading. Speculation is as old as a mountain, this is Livermore's classic discourse, which shows that as early as a hundred years ago, the trading method has been fixed as trend trading, and this concept has never changed from him to the present. That's why I say trend following is probably the only way to make a profit.

There are actually many people who understand this truth, but why are there still few people making money in the market and many people losing money? Because trend trading is too difficult to persist. Trend trading is a typical trading form with simple principles and extremely difficult processes. To explain it in the most straightforward words, trends do not often occur, and shocks are always present. Because the trend needs to wait, and the volatile trading idea of ​​selling high and buying low is more in line with human preference, so trend trading is too difficult. There is a very famous picture in the turtle trading rules, which is a 500,000 principal. It took about eight years to achieve more than five million yuan. This picture perfectly illustrates the difficulty of trend trading, because in the first year, this trader had a principal of half a million yuan and achieved nearly one hundred yuan in about ten months. 10,000, and there was a withdrawal of 500,000 in two months, which is equivalent to no profit at all after one year. If you play for nothing for a year, the average person will collapse early. What kind of broken system has such a big withdrawal without earning a penny a year? Eighty percent of people would abandon the system. And this is just the beginning. I remember that in the third and fourth years, the profit reached almost 3 million, and then encountered a bad trading period. I guess the market must have been crazy and volatile during that period, and then the funds were withdrawn to about 150. Ten thousand, the average person estimates that it will explode directly, and they simply cannot stand such a system. And all this is due to insufficient understanding of trend trading. In fact, the main profit of this account depends on the general trend in the past few years, and it has doubled ten times in the end, but if it is you, can you wait? This requires more than patience, but a thorough understanding of the system. When I told others about this before, this method was too stupid. The correct approach should be to follow the trend when there is a trend, and sell high and buy low when it fluctuates. Wouldn’t this avoid retracement? I guess there are many people who have this kind of thinking, and for those who have this kind of thinking, I can only say that you still have a long way to go in trading, and the matter of making profits is still far away from you.

There are too many details to discuss on the topic of trend trading, which cannot be explained by a question or an answer. When I write this, I find that my emotions are actually a bit out of control, because the questions I have answered before rarely use strong words. But this article is a bit fierce because it wants to defend trend trading.

Are you satisfied with this answer?

I have used trend-following trading before, maybe it is not enough ability, maybe it is not suitable for me, but it has not been successful anyway. So a little bit of a say.

Whether there is a long-term stable profitable system, in fact, there is no. Not only trend tracking, but also other things can't be done. It can only be continuously modified and strengthened. Don't even think about achieving long-term stable profits by relying on an unchanging trading framework.

So when does trend following fail? I personally think that when it is a shock, the shock time is longer than the trend. If you switch to a five-minute short-term futures system, if you don’t make money for three months, it will basically fail. Why is the success rate of trend following generally less than 40%, and the shock consolidation takes a long time, but it is still effective? It should be a mean reversion (buying the bottom) system with a high profit-loss ratio. The profit-loss ratio can reach 1.5. I am so moved that I cry, but you dare not do it if the trend tracking is less than 2. What do you mean? It's just that if you earn one sum and it's not enough to accompany you twice, you're not considered good. Some good systems go up to 10.

To put it bluntly, a profit equals your loss for half a year, and in the end it is a lot of profit. Do you care about the part that fails in the middle? Then it won't. You will regard it as a normal retracement, and you can't be calm. This is the fundamental reason why trend following is effective for a long time.

There are still many people who think that trend following can only be done in long-term and large cycles. This actually depends on how you understand it. In terms of the number of K-lines, if you want to make a lot of money, it will definitely take time, and it will take time for the trend to come out. Of course, it can be said to be a long-term. But this is not a long line in the time dimension, but in space. Can the 60-minute cycle work? Actually it is possible. Of course, the shorter the production cycle, the more disturbances, the more possible mistakes, and a higher profit-loss ratio is needed as a support.

So why short-term mean regression is generally done, because the trend system is difficult to develop, and the success rate is too low, not many people use it. And short-term trend changes are more frequent, which requires constant judgment and is very tiring. As for foreign exchange trading, do you think there are more short-term or long-term ones? At least I have been trading for so many years, and I can’t count the long-term ones for a few months. Trend following may be more common in other financial derivatives.

In addition, trend following is just a method, and it may be able to achieve long-term stable profitability. But there is definitely more than one way to make a stable profit.

The original question seems to read that the questioner is more inclined to follow the trend to achieve a stable profit trading path. Well, today I will elaborate on how to use trend tracking to achieve stable profits.

First of all, the way of order trend following method must be to follow the trend. In the upward trend, we only wait for the bargain to go long, and in the downward trend, we only wait for the rallies to sell short.

There will be benefits if the tune is well grasped, but we can't do the thing of picking up sesame seeds if we lose the watermelon. Therefore, seeing the trend clearly is the most important thing in everything. The order can be wrong, but the direction must not be wrong.

So how to determine the direction of market movement? The simple judgment method is that the high point keeps making new highs and the low point keeps rising, which can determine the upward trend. Making new lows and lower highs confirms a downtrend. An uptrend line can be drawn by connecting the two recent low points in an uptrend, and a downtrend line can be determined by connecting the two recent high points in a downtrend. How to judge a trend change? If it falls below the upward trend line, the high point will no longer make a new high, and the low point will start to make a new low, which is in line with two identifiable trend changes. Breaking through the downward trend line, the low point no longer makes new lows, and the high point starts to make new highs. If two points are met, the trend can be determined to change.

When doing trend trading, according to your description, the focus is on tracking. Then, how to follow, this is a skill, and knowing the mobile stop profit can maximize your profit, so how should we choose the mobile stop profit?

The premise of discussing this topic is to have an overall trading idea and trading strategy, because stop profit requires certain strength. Some people say that stop loss is an art, but I think knowing stop profit is a higher art, and I have to mention The most important thing is to take profit from the trend. Maximizing profit is the purpose of our stable and profitable trading. "Trend stop profit" is only a part of trend trading. Our correct approach should be to stick to the position as long as the trend is still there, and make a profit. Maximize until the trend is broken is the time to get out. In this way, we avoid the ordinary building of positions and taking profits. We do not need to make orders every day. Only by patiently waiting for the opportunity can we seize the market.

Not to mention false propositions. You can't think that there is no such thing just because people who have made stable profits have not seen it. I think you're stuck in a fixed mindset. Trend following is used well and can make stable profits. But the way to make a stable profit is not just following the trend. Any method should be just a method, not a guideline. It seems that if you don’t use this method, it’s wrong, and it’s just as deviant as it is.

I have personally seen a few trend-following companies, and the problems I encountered were also different, such as profit stop problems, trend judgment problems, and so on.

To put it simply, trend following is to use trends to make money. To put it simply, it is essentially trading on the right side. It's just that the method is more complicated. So the question is, can you make money by following the trend? If this is the case, making money is too easy, who doesn't know how to take advantage of the trend?

The trend is easy to learn, easy to get started, but difficult to master, that is, easy to understand but difficult to master. How to grasp or judge the trend that must exist in the market but do not know when it will occur is the difficulty. But many people do not judge well in this regard. This is their own problem, not a crime of war.

In addition, many people focus on how to magnify profits when using trend-following transactions, but in fact the most important thing is to stop loss. We cannot control the profit of a single order, but we can control the stop loss.

The root of trend-following profitability is that trend trading relies on cutting off the long tail of negative yields and retaining the long tail of positive yields.

The reason why it is difficult for you to see people who rely on trend tracking to make stable profits is not only their own reasons, but also the market reasons. Because the market is maintained in a low volatility range most of the time, only a few of the time will gradually establish a trend.

My point of view may be a bit extreme. I think that if you want to make long-term stable profits, you must trade with trends. Big small profits are extremely risky, but accumulating sand into towers is a trend trading or a short-term profit method for small profits.

What Stanley Crowe, Richard Dennis, you know this too, why don't you talk about Buffett and his ilk. We will always ignore most of the situations because of our own cognitive biases, of course, this is not the point. The point is, trend trading makes it easier for traders to make money. Why, I think from the following points.

1. Trading frequency.

It can be said that the fewer the number of transactions, the smaller the risk of loss and the greater the probability of profit. We all know that few people make money in frequent transactions, which is in line with the law of large numbers within a certain period of time. Every opening is a risk, and every transaction is a journey into a different risk. Because we do not know the future outcome of each transaction. People who don't go to the beach will not be swallowed by the sea, and those who drown will be in the water. This is where frequency comes into play. The purpose of our trading is to make money, not just trading for the sake of trading. Trading is just one way to make money. Therefore, the better the number of transactions, the greater the probability of making money. Trading 10 times a year will definitely have a higher success rate than trading 10 times a month.

Second, the trend following operation is less difficult.

Once a trend is formed, it is difficult to change. As long as the trend is formed, trading at any point in the trend can eventually make a profit, and the profit margin is huge. Just like the U.S. stock market since March, even if you don’t catch up with the train in March, you will have a good profit when the Nasdaq breaks through the record high and enters the market. Regardless of whether Bo Xiaoli will go against the trend, at least it needs a long time to watch the market. Anyway, since I have been trading for so long, I have never seen a trader who can play like a flower in the short-term.

3. Trend trading is the mainstream.

Trend trading is something that the public expects and most of them agree on. You go against him, do you think you will be a hero? Don't tell me about the first person to eat crabs, you will definitely not be the first, nor will you be the last. Before Ma Yun succeeded in Taobao e-commerce, did no one try to go the way of e-commerce? The Chinese are so smart, I don't believe that only Ma Yun thought of it, it's just that we don't know it.

4. Finally, this is a question about trading philosophy. People who want to accumulate small profits to make big profits typically want to seize most of the profits in the market, but forget the existence of risks, and always complete transactions while looking for opportunities and trading opportunities. For trend traders, it is more likely to be in awe of the market, fear of risks, and so on.

Right now, that's about all I can think of. Retail investors have not reached the level of high-frequency institutional trading, so don't think about making small profits at the level of algorithmic trading.

Before elaborating on trend trading, let me talk about the trading drawbacks of the two trading legends in history, Stanley Crowe and Richard Dennis, mentioned by the subject.

After Stanley Crowe became famous in the sugar futures battle, he almost stopped. He also established his personal reputation after making a fortune in sugar futures. Objectively speaking, Stanley Paul's sugar transaction is due to his technology, and more importantly, it is supported by a market that is rarely seen in history, that is to say, "times make heroes."

Turtle tactics. This trading strategy itself has a fatal BUG, ​​and Richard Dennis, the initiator of this weakness, knows it himself. Most of the varieties used in the international capital market are US dollars, so linkage between varieties is common. When there is a linkage entry signal for multiple varieties, it will cause a situation of heavy positions, which will eventually lead to losses. Richard Dennis' last huge loss was for this reason.

Next, we will return to the main question. Trend following itself is not a false proposition. It is one of the trading strategies. The departure of Stanley Paul and Richard Dennis, they know that there is no 100% profitable transaction in the world. Strategies, there is no general victorious, they leave when it is time to leave, they all choose to leave after making huge profits, they can afford to let go, this has nothing to do with trend following strategies. There is no need to tie them together abruptly and make unnecessary considerations.

For trading, whether you choose a long-term strategy or a small-scale strategy, you can achieve the goal of long-term stable profits. The key is which strategy is suitable for you? Stanley Paul has held positions for several months, and he has held positions with a large amount of money. He can live with his temper and not look at transactions for several months. Can you do it? If you can, then you are suitable for the medium and long term.

If you prefer a flexible trading method, enter the market on the same day, or exit the market every few days or even on the same day, then the short-term strategy meets your requirements, but the short-term focus is on trading skills, so you need to do in-depth research on trading skills. Including naked K, moving average, MACD and other trend indicators, shock indicators, the impact of various economic data on the trend of varieties, etc., can you do it? If you can, it is also good to do short-term.

When you ask these questions, it’s not about trend trading at all, but because you haven’t figured out that trading is not what you think and can be done once and for all, whether it’s long-term or short-term. Your cognition goes astray, and it is useless to study any varieties, advanced strategies, and effective analysis techniques.

Thank you Zhou Qisi for the invitation

. Not sure if the trend following you mentioned means trend trading.
If so, I don't know why you can conclude that people who make stable profits have no trend traders.
In fact, most of the people who make stable profits are trend trading.
Because all technical analysis has three basic premises:
1. The market behavior is inclusive and digests everything;
2. The price evolves in a trend;
3. History will repeat itself.
And the price evolves in a trend way is one of them. Since it evolves in a trend, doesn't it mean that trend trading is the best way?
As for the trading method formed by shocks, in fact, if you want to make profits, you must also do small-level trends, but the cycle is relatively small.

As for the examples of Stanley Crowe and Richard Dennis, many people have already said it clearly, so I won't repeat it here.

In fact, there is no need to be too entangled in this. The two most critical points for trading profits are the winning rate and the profit-loss ratio. Just try to improve these two points.
For stable profits, the profit-loss ratio is more important than the winning rate, and it is precisely the profit-loss ratio of trend trading that is extremely large, which is why most people who can make stable profits are trend traders.

I personally don’t agree with the subject’s statement that the so-called trend following is a false proposition. I’m personally very optimistic about trend following. You haven’t seen the shadow of trend followers being able to make stable profits. Maybe you’ve seen relatively few. For real institutions or large teams, their main source of profit is dedicated to trend tracking.

The best way to understand trend following is not just to decipher the formulas that make up a strategy, but to meet the people who use it.

What we've come to realize through our observations of trend following is that if you're serious about historical and current performance data for trend following traders, you have to make choices.

You can accept the authenticity of these data and make an objective assessment of yourself and your investment method. Alternatively, you can pretend that the performance data doesn't exist. If you think you might choose the latter, you need to reconsider whether trend following is right for you.

The profit source of trend following is the fluctuation of market price, which is one of the most fundamental principles of trend following ! The impact and volatility of price swings cannot be accurately predicted, which is why trend following works! Trend followers generate significant gains because their final decisions are based on one core piece of information: price. In a market environment full of uncertainty, it is especially effective if our decisions are based on a single, simple and reliable fact!

Don't try to guess how far the trend will go, no one can. Prices make news, not news makes prices. The market will go where it is going! There are two important assumptions for a trend following strategy to be successful. First, market price trends often occur, and second, a trading system can be designed to profit from these trends! The most basic trading strategy of trend following is: cut off losses and let profits run! Let your profits run, have a tenacious mentality, and only know how to try to protect every penny of profits, which is actually preventing you from making more money! If you are not willing to accept losses, you cannot make money, just like you only inhale, but you are not willing to exhale!

Trend following is a way of thinking! ! Maintaining a positive attitude is a key ingredient to success!

The Five Core Questions of a Trend Following Trading System

1: How does the system make decisions, and what kind of market does it trade in?

2: How does the system make decisions, how much should be bought and sold?

3: How does the system make decisions, when do you buy?

4: How does the system make decisions, and when do you liquidate your losing positions?

5: How does the system make decisions, when do you exit a profitable position?

If trend following can really achieve sustainable and stable profits, then why do trend following people end up writing books? And some have written many books. Is it for the salvation of sentient beings? Please note: I said "sustained and stable profitability". Don't tell me that if you earn today, you will lose money tomorrow, or if you earn this month, you will lose money next month. Or losing money for several months in a row, suddenly encountering a wave of market conditions and making money back, this is called stability, NO! I have also encountered a big market, which doubled six times within a month, but then lost money again within the next two or three months. Don't tell me about money management, because I have scientific and strict money management, so I only doubled it by 6 times. Because of this, I have never liquidated a position, not even once.

Financial trading is the cruelest profession in the world, bar none. According to statistics, the proportion of people who can achieve long-term sustainable and stable profits in financial transactions is less than 3/10,000. Is it too far from what everyone thinks? Do many people think that 20% of people are making money? Why is reality so cruel? Are most of us wrong? Has anyone really thought about this? I have more than 300 books on financial transactions, and nearly half of them have been carefully studied. Almost without exception, these books advocate trend following. But what happened? Do you really think that after losing several times in a row, you can make up for all the losses with the money you make once and still make a profit? My practice tells me that it can be done in a few cases and not in most cases.

Speaking of this, some people will say that it is because your own level is not enough. I admit this, but don't ignore the fact that less than 15% of the trending market in the market, and the trending market that can really make you a big profit is one in a million. You can count on this one in a million trending market to bring you You get rich? No matter how awesome your method is, you still have to rely on the real trend to make money. Is it possible that you can create a trend market by yourself?

I have been struggling for nearly three years, and have spent countless time and energy. Although I have not had a single position, I am still in a state of loss so far. At this time, I seemed to understand that there is no problem with the thinking angle of the trend following concept. What it actually talks about is that our operations should move with the direction of the price. But most people get trend following wrong. What most of us think is not to open for three years, but to open for three years. As everyone knows, those small profits every moment just flow away in vain. In order to pursue the perfect goddess in our minds, we missed a lot of girls around us, and finally ended up lonely for life. This is like doing business. After calculating your own costs, you always have to set a price to sell. If the customer is willing to accept this price, the transaction will be completed. Have you ever seen someone who wants customers to bid for business, and the higher the better? If so, the day he opened the door meant that it was about to close. I am also in business, and financial transactions are just my hobby, so I understand this truth too deeply.

Therefore, I always want to make a big vote! For this big ticket, we turn a blind eye to the small profits around us. This is our trend-following thinking. As everyone knows, that big vote can't save us. In fact, this is entirely our wishful thinking, an unrealistic fantasy, and a manifestation of human greed.

In fact, I also think that the so-called trend following may not be applicable in a highly leveraged market like foreign exchange. Moreover, most of our foreign exchange traders can be said to be short-term trading, or band trading, but very few of them do trend following.

The foreign exchange market is a 24-hour market that can be long and short. There are much more daily trading opportunities than the stock market. If it is better to follow the trend of the stock market, then it seems a bit wasteful to follow the trend in the foreign exchange market.

Personally, I also prefer to make orders every day, whether it is the so-called intraday swing orders, or short-term orders in key resistance or support areas that make a quick profit and go, I can grab a certain amount of profit. And everyone says that investment is actually a process of accumulating more, so why can't we earn as much money as we can every day, and then accumulating more? Trend following is not necessarily able to do this because trend uncertainty is high.

In addition, for trend following like turtle trading, the premise is that the trend must last long enough for the follower to earn huge profits. Moreover, a huge retracement needs to be endured. This has higher requirements for traders, such as long-term patience, such as strong capital; and these two, in fact, most leeks do not have.

So, I think it's not that we can't follow the trend, but we won't always be stuck in one direction. Trading is inherently a flexible thing, so why should we set limits for ourselves?

There is a trend in the market, and you follow it. How can this be a false proposition? The stable profitable people you know do not follow the trend. Does it really mean anything? Because the people you know are limited, the sample is too small, so you can't draw your so-called conclusions.

Theoretically speaking, the trend-following strategy is based on the assumption of market inefficiency. The transmission of fundamental information requires a certain amount of time and space, while asset prices cannot immediately reflect changes in fundamentals. During the process of price transfer from an unreasonable range to a reasonable price formed a trend.

In particular, when the price fluctuates sharply, exceeding the psychological tolerance limit of the trader or forced liquidation, positive feedback and stampede events will be promoted, the correlation of time series will be strengthened, and a trend will be formed.

If you really want to understand trend following, you can take a look at Michael Carver's masterpiece "Trend Following":

The book lists the achievements and strategies of some famous traders, and what is especially powerful is that they aim to obtain absolute returns.

In fact, this strategy can be applied to different markets including stocks, bonds, currencies and commodities, etc. It is a comprehensive and diversified investment.

Over the past forty years, regardless of the bull market or bear market, trading using the trend following strategy has always made huge profits, indicating that this is one of the most profitable strategies.

At first glance, he is just a novice, and he has no understanding of the market at all. The market has two forms, shocks and trends. If it is enlarged a little bit, the market is a big shock! Trend following is the essence of the market, follow the trend in the shock, find out the shock in the trend, the shock, the starting point of the trend, the end of the trend, the reversal of the trend, just a few rhythms!

It's not fake at all, because there are enough market traders, and there are too many people who make a fortune silently, you just don't understand it.

Simply put, trend following is to open a position to follow the trend after the trend is formed, and close the position until the trend reverses.

Since the market trend is in a volatile market most of the time, and a small amount of time is a trending market, the trend following strategy is generally a ladder-shaped PnL curve:

The ladder-shaped curve of the trend-following strategy will draw back losses most of the time, and when the trend comes, often a few transactions can make the PnL curve reach a new high in a short period of time. However, when the trend reverses, there is often a certain retracement, and this part of the retracement is generally a floating profit retracement.

From a profit point of view, it depends on whether the market is trending, and whether the strategy can make more profits when it is trending than it can lose when it is turbulent.

There has been a lot of research in the financial academic community. As shown in the figure below, the trend following strategy was used in World War I in 1916, the Great Depression in 1929, stagflation in 1968, the oil crisis in 1973, the Internet bubble in 2000 and the 2008 Under the global financial crisis, they both generated relatively large profits. The traditional stock-bond allocation is prone to losses of more than 20% in this case.

From the above, we can see that the trend-following strategy can diversify risks on the one hand, especially the risks when crisis events occur, and on the other hand can increase the return rate of asset portfolios, which is worth long-term allocation.

In fact, this question can be understood from another angle. The market trend is actually a game between long and short, and it is also a game of resources. This resource may protect funds, morale, emotions, physical objects, etc. The overall trend of a country or industry is closely related to the allocation of resources. For example, a country's exchange rate, compared with another country's exchange rate, shows that the upper limit of resources in one country increases while the resources in another country declines. Obviously, the increase in resources will increase the value of the national currency, while the other pot will depreciate. In the same way, if an industry continues to inflow money because of a political decision of the country, then the upper limit of the resource circle will increase in this industry, then the market's ability to make money and expand will continue to improve, which in turn will continue to stimulate continuous investment of funds, so that the trend of self-strengthening will be It came out, and so did the trend. As long as the return rate of inflow funds is lower than that of lending, then the trend will appear stagnant, so the size of profit is related to fluctuations, and the trend will fluctuate relatively large. In terms of time latitude, making trends is the key to making money.

Trend trading is one of the trading methods, which has nothing to do with the exit of the master trader. If you win, you lose, if you earn, you lose, and the total amount is a profit. You don’t need to keep your eyes on the other party’s loss. Do you think there is a way to make a profit forever in this world? That's your own ideology gone awry and has nothing to do with trend trading methods. What you need to adjust most now is your understanding of trading, otherwise you will not accept any trading strategy, because it is really difficult to achieve a 100% method that satisfies you.

If you are willing to understand the thinking of trading in the next trend, I would like to share it with you, hoping to help you.

1. Analysis logic: from the big picture to the hourly chart

First judge the overall situation, if it is bearish, then for the trading varieties, I will go short and do long or not at all. The long position is much lighter than the short position. Then look at the specific varieties, first look at the position of the monthly and weekly lines, look at the direction and measure the wind ratio, if the monthly and weekly graphs trend downward and are at a high level, there is a lot of potential downside, and it has just fallen not long ago. If the graph is large, then this product is the target of short-selling transactions. The initial position can also be heavier. I will look at the daily trend and find the trading point at the beginning of the trend or the rebound rhythm point. If it is the trading point at the beginning of the trend, I will Just enter the market. If it is the latter, I will go to the hourly chart to find the starting point of the downward trend when the daily rebound feels that the length and space are enough. This principle is that the weekly, daily and hourly charts resonate downward at the same time. Time trading has the highest chance of winning. The monthly and weekly charts look at the space, the daily charts look at the running status of the trend, and the hourly charts look for buying and selling points.

2. Trading technology: look for the law, read it thousands of times, the meaning will come out

Observe more and find regular connections. Financial markets are connected, not isolated.

Just like a big opportunity, such as an economic crisis, you will find that almost the global stock market is only different in the details of fluctuations, and the results are surprisingly similar. The stock market has not been spared. All international commodities have plummeted and the U.S. dollar has skyrocketed. This is by no means accidental. The more consistent these market trends are, the greater the opportunity will be. However, the difference in this detail is enough to kill people. It is necessary to have a solid grasp of the details of market fluctuations If the ability of trading technology is not enough, you will still not be able to make money and may lose money if you look at the opposite direction. Therefore, to continue making money, you must be able to see and do the right thing. Seeing the right is to find trading opportunities, and doing the right thing is to grasp the trading opportunities. Both are indispensable.

In fact, seeing and doing right depends on trading technology. Without trading technology, we cannot find and feel opportunities from charts. Without trading technology, we cannot reasonably join the trend generated by opportunities to make profits. These are all dependent on technical capabilities.

You just observe and see what the market is doing before the trend, what is normal during the trend, and under what circumstances the trend may end. Summarize the rules, just look at it repeatedly, read tens of thousands of charts, and the meaning will come out. No one can understand it when they come up. If you watch a lot and get familiar with it, you will naturally understand it.

3. Be a determined trend-following trader

Specific to the operation level of an individual trader, the timing of trading cut-in should not be in a too large cycle or too small cycle. If the cycle is too large, the stop loss space you have to bear is also large, so you have to use very, very light You can only deal with the position, which will waste large-level opportunities. If the cycle is too small, there will be a lot of clutter, and you may stop the loss too frequently, and the cumulative loss of funds will not be small, so you must take the golden mean, not too big Small cycles to cut into the trend, so as to balance opportunities and risks. Below the hourly chart, I basically don’t look at it (unless I pay attention to the reversal and retreat of the 15-minute chart after the sharp rise and fall), as I said, the clutter will multiply, and you may have to face frequent stop losses for a little cost advantage. This is another imbalance. I don't do intraday work, and I can't make much money if I'm exhausted.

When the profit starts to run, determine whether the take profit is wide or narrow according to the measurement of the situation (this often depends on whether the trend length of your trading variety has just started or is long enough, whether the space below or above is huge or small. Comprehensive decision), you need to choose flexibly according to your own experience, when you are short, you are close to the target position, and when you encounter the bottom of the stage, you must take the initiative to lighten your position (the same is true for long positions). Desire is greater than holding positions, and the focus is on maintaining profits. The price operation stage is different, and the coping strategies are also different. That's it.

I think this is a false proposition.

In the foreign exchange market where longs and shorts are completely equal, purely speculative, and a complete zero-sum game, everything is nothing more than a game of probability. A trend can only be called a trend when it occurs or even ends. The so-called tracking may track oscillations or even reverse trends. Use your tracking strategy to test a large number of past historical market prices. There must be many positive positive examples and many negative negative examples.

Therefore, trend following is just one of the various and strange trading strategies, but you named it or classified it as trend following. In essence, it has nothing to do with trends or tracking. It is a probability game.

This includes how to identify the trend, how to identify how the trend is running, the choice of opening time, the control of the position process, and the risk control of the overall strategy.

I don’t know if it’s a false proposition. I also have a few questions. Which era are the trend-related documents from? Was the market environment at that time the same as it is now? Are institutional traders in the City and Wall Street trading on these?

There's still a lot to say, let's extend our thinking!

I think the range of trend following is a little bit wide. In other words, traders may not understand how long the trend lasts.

Let's take American technology stocks as an example. If we can really track the trend consistently, then we may have achieved financial freedom long ago. In other words, for example, if you buy Apple's stock, you can buy it if you have money, and its trend in the past ten years has basically not stopped.

Not only Apple, but also Moutai are good examples of trend following. The main test is whether people can persist all the time, that is, they can keep buying without hesitation after the trend comes out.

It is actually the same in the foreign exchange market, but the trend of foreign exchange may not last as long as some stocks. But when we make transactions, we are actually betting on a future trend. It doesn't matter if the trend is for days, months, or minutes. Some people say that intraday short-term trading is not following the trend, but in fact it is, it is just following the trend with a small cycle.

Going back to what the subject said, long-term stable profits. If I bought Apple stock in 2010 until now, then I have been making money for 10 years. Is it stable profit? That's for sure, even though I haven't done much with it. If it is buying other assets, I will leave every time I make some money. After 10 years of doing it, I will eventually make money, which is considered a stable profit. The question is that every time you make a small profit, do you trade completely on the left side, or do you follow the trend of a small cycle?

So in my opinion, no matter how you trade, it is actually possible to make a profit, but trend following may be relatively safer. The topic owner said that there is no liquidation but a loss, it should be that his own trading system needs to be improved.