Hi ely,I take it that you weren't too successful with this trending strategy? It looks simple enough, but it still seems like a 50/50 chance to me. L2 might give some insights, but I don't know if it would help that much. Perhaps the trending was going for too long before you jump in? Or were you having second thoughts and made you take longer to pull the trigger? I know I have that issue. Doubting myself, only to see that my guess is accurate, jump it and BAM! I get taken.
Apologies, my last post was misleading. I meant to say that I've always struggled with trend trading in general (although I'm getting better at it, slowly), not that I've struggled with this particular strategy as presented by Richard. This is a reflection of me and my trading skills (or lack of them) and not Richard's strategy! If executed properly and with discipline (two very big 'ifs'), the probability of success ought to be much greater than 50%. There are a number of reasons for this:
1. A trending instrument is more likely to continue trending than it is to reverse (in spite of the comments in my last post). In other words, continuation is more likely than change.
2. There are trending stocks and there are trending stocks. What I mean by this is that Richard is very clear that only stocks with the strongest and cleanest of charts should be traded. Retracements must be shallow, consolidations short lived. There should be little or no evidence of any long upper shadows / spikes (in up trending stocks) and the low of each candle should be higher than the low of the previous candle etc.
3. Your point about joining the trend too late is a very good one. To help avoid this problem, I now look at the daily ATR of the stock. If it's already moved in excess of 70% of it's daily ATR - I leave it alone. Attempting to join the trend when the stock is at or beyond its daily ATR will reduce the probability of a successful trade.
4. Only take trades where the stock is moving in tandem with its sector and the main market. Richard prefers to monitor the futures for this purpose, Grey1 and subscribers to his 'Technical Trader' forum follow $INDU and I prefer SPY - the index etf. Make sure the market is on side.
5. You'll notice that many of Richard's trades are taken soon after the stock has breached the previous day's high or low (indicated by the heavy black line on his charts). The thinking here is that if the stock is trending down - for example - then all those people who are long from the day before are in a losing position and starting to hurt. As their stops are hit, the strength and momentum of the trend builds, adding to the selling pressure.
If all the above 5 boxes are ticked, the probability of a successful trade should well exceed 50%. Perhaps others can add to the list of what they look for before attempting to jump on board a trend?