Longer term approach

Firstly I'd like to thank all the people posting on this forum for the wealth of information. It has been a pleasure to read.

I have been reading quite a few books on trading and reading this forum almost daily for some time now. I also traded indexes using finspreads for about 6 months.

I have come to the conclusion that the odds are really stacked against me. I like the idea of trading and I'm not adverse to losing money but I'm starting to wonder whether my time and effort would be better spent elsewhere for eg building up a business.

However I would still like a long term approach to take advantage of compounding. Whether I trade or not I would still like this. I would also like to be a bit more active than just putting my money in an index tracker and coming back to it 20-30 years later.

I have played around with buy and hold using small leverage on historic prices of the dow. It was yahoo data so I know its not the best. Leveraging up to half of the market produced some nice results over time and didn't take me out. I'm pretty sure if I had used it on the NASDAQ I would not have survived the 2000 - 2002 years. I'm also thinking of adding a buy the dips strategy using something simple like EMA 100 or longer.

To protect my profits I would like a way of scaling out. Unfortunately I can't think of an approach that works. Is the only way to do this to just levergage up to a level that you can always "ride out" ?

Many Thanks.

Max

The only thing I can say (not being an expert, a pro or a successful trader as yet) is that if you can stick to trading the trend, and look at maybe EUR/USD (as that doesn't move too severely compared to say DJIA or EUR/JPY). The problem comes with the temptation to intraday without really know a good strategy, so anything you gained from trend trading midterm, you end up losing during the day, get fed up and say it doesn't work. I speak from experience.

And I feel I only learn by losing money.

Hope that provides helpful insight.

-Darren

PS I would start looking at a midterm trade around Thursday or Friday for EUR/USD, as it may approach longterm support/resisitance levels and touch longterm trend lines. Don't know whether it will be a buy or sell until it rebounds or cuts lines, obviously. Oh, and it may do it sooner this week or early next week. Such is the market.

Max - Dow Theory still holds and when you take the short as well as the long sides (a not unreasonable extension of the theory) it's a viable trading strategy for those that want to spend the majority of their time doing 'something else', but also want a slightly more sensible strategy than buy-and-hold, or, god forbid, placing their funds with a 3rd party to 'invest'.

You can google the dow theory and work out the short side, or if you want a quickie version let me know and I'll write one up for you.

Shadow - Thanks for the advice but I'm not looking for a system to trade. I have read fair bit and traded for a while so I have an idea what I would do if I were to trade again. I'm looking for a simple slightly more active than buy and hold approach.

Bramble - I'm aware of dow theory but it looks incredibly bad to trade. I would post a chart but I can't figure out how yet! Basically looking at the 5 year DJIA chart for the first 3 years each dt "signal" loses money. Its only in the last year or two with a good rally and no signals other than the starting buy that works out. Simply buying when the price hits the 100 EMA region seems to be a much more successful buying approach. I agree dow theory gives a solution to the exit or to selling but I don't think the overall performace is very good. Any more ideas or comments?

maxwe789 said:

Bramble - I'm aware of dow theory but it looks incredibly bad to trade. I would post a chart but I can't figure out how yet! Basically looking at the 5 year DJIA chart for the first 3 years each dt "signal" loses money. Its only in the last year or two with a good rally and no signals other than the starting buy that works out. Simply buying when the price hits the 100 EMA region seems to be a much more successful buying approach. I agree dow theory gives a solution to the exit or to selling but I don't think the overall performace is very good. Any more ideas or comments?

Click to expand...

You haven't modified it to allow for short trade signals, but perhaps it's not for you as you seem to have an idea of the performance you want, but not how to achieve it within the time you're planning to allocate to the effort to achieve it.

There are currently a number of threads where individuals are looking for off-the-shelf edges at the moment, perhaps this is more up your street.

I was allowing for short trades. Both the long and the short would lose until a big move. I found that unless there was a big move waiting for the lower low followed by the lower high to get out or to short would quite often be below the original buy point. Using Dow theory can you have a hold or cash signal?

Please don't get me wrong. I'm not after a holy grail or effortless profits. I understand effort equals return. Just looking for simple things to add to a buy and hold strategy to squeeze a few extra percent out. like buying at ema 100 would probably improve performance by a percent or two against randomly buying. I can find ways to get in but getting out and keeping profits safe i'm finding hard. I was considering closing all positions after a 25% decline and waiting for recovery.



Thanks for your help

Max

maxwe789 said:

I was allowing for short trades. Both the long and the short would lose until a big move. I found that unless there was a big move waiting for the lower low followed by the lower high to get out or to short would quite often be below the original buy point. Using Dow theory can you have a hold or cash signal?

Click to expand...

I've never seen anything other than in short or in long. Interesting thought though.

maxwe789 said:

I was considering closing all positions after a 25% decline and waiting for recovery.

Max

Click to expand...

Max,

be careful that your wide stop doesn't take you out of the game just at the wrong times - ie before the bounce. Personally I'd look at tight stops or none at all.

Cheers,
UTB

Looks like I'm trying to push buy and hold too far.

I think my options are to use small leverage and risk getting taken out or no leverage and buy dips or combination of the two.

Cheers guys.