If you are shorting a strong trending market....

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As usual, right on! Thanks for the reminders. It never ceases to amaze me when a potential divergence is presumed to be complete and in place when there isn't even a turn down in the indicator indicated, let alone in the price action. I just want to scream NO DOWN MOVE STARTS ON AN UP BAR! Oh, well, there are a thousand ways to skin a cat and lately it seems it's been the cat doing the skinning. Consequently, some of the most persistent short sellers went absolutely crazy with frustration today -- UH...THAT MUST BE THE TOP!!!

this board seems to be polarizing between trend followers and statistical traders - there is room for all types. every system has its negatives and it is not a crime to get continually stopped out taking trades that have a statistical edge, even when they dont work for a string of trades - there are some other rules to trade contrarian, but they are for a different system outlook - short an exhaustion gap (up or down) using the OOPs technique, for one. usecontrarian measures to trade reversion to the mean and overextended "rubber band"moves, especially with an extreme tick and volume - like 3SD BBs, and take profits as soon as reversion to the mean is accomplished. use some of the hit an run techniques as described in street smarts. use patterns that have backtested, e.g. Gartley. pay attention to position size and risk management. unfortunately, this contrarian trading has, because of the trend strength, only worked on shorter and shorter time frames - generally as these time frames shorten, you can be warned that a change is coming but you cannot know when. it also means you cant blithely put on a trade and leave for a few hours/days. I dont think, despite the assurances, that these posts as to the fallacy of non-trend trading are just made for the goodness of mankind - i believe we are seeing the market's intended reinforcement that this is the 'only way to trade' working, with an increase in self-confidence and disdain that usually is a precursor to a change in environment. in the end, it is a personality question, a timeframe question and a perception question. sacriligious as it is to the board - someof the biggest winners in the 2008 meltdown were pure fundamentalists, who did not care to follow the trend. most HFT could care less about the trend either, but use the rubber band and mispricing technique. there is room for a lot of styles in the market - one of the worst things to do is to mix in a style that doesnt fit to your temperment or abilities - far better to have 10 losers in a row following discipline. time will tell.

this board seems to be polarizing between trend followers and statistical traders - there is room for all types. every system has its negatives and it is not a crime to get continually stopped out taking trades that have a statistical edge, even when they dont work for a string of trades - there are some other rules to trade contrarian, but they are for a different system outlook -

short an exhaustion gap (up or down) using the OOPs technique, for one.
usecontrarian measures to trade reversion to the mean and overextended "rubber band"moves, especially with an extreme tick and volume - like 3SD BBs, and take profits as soon as reversion to the mean is accomplished.
use some of the hit an run techniques as described in street smarts.

use patterns that have backtested, e.g. Gartley.

pay attention to position size and risk management.

unfortunately, this contrarian trading has, because of the trend strength, only worked on shorter and shorter time frames - generally as these time frames shorten, you can be warned that a change is coming but you cannot know when. it also means you cant blithely put on a trade and leave for a few hours/days.

I dont think, despite the assurances, that these posts as to the fallacy of non-trend trading are just made for the goodness of mankind - i believe we are seeing the market's intended reinforcement that this is the 'only way to trade' working, with an increase in self-confidence and disdain that usually is a precursor to a change in environment. in the end, it is a personality question, a timeframe question and a perception question. sacriligious as it is to the board - someof the biggest winners in the 2008 meltdown were pure fundamentalists, who did not care to follow the trend. most HFT could care less about the trend either, but use the rubber band and mispricing technique. there is room for a lot of styles in the market - one of the worst things to do is to mix in a style that doesnt fit to your temperment or abilities - far better to have 10 losers in a row following discipline.

time will tell.

When you are trading a trending market, follow the trending rules. That's all was the point of my post.

Well it has been proven in real-time on TT for months that the other methods that you described has been pure struggle and furstration, not to mention the financial damage. If anyone disagrees that one can violate the trending rules and yet make money in a trending market, i am all ears. Please show me some live examples.

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NAV. very good post.

Most significant tops drop about 2 - 3% the first to second day, so you really don't have a lot of time to get in.. But I have realized a couple things... One is to watch for continuation signals. Let's take yesterday.... We had a big up day with a large candlestick.... 1) If we are to go to parabolic we will need to go higher here, which would mean you would ride the wave higher with stops. 2) If we go down we 3 days to break below the trading candlestick of yesterday's move... If we don't the market is still strong and will likely go higher 3) If we can break and close below the candlestick by Monday night I would not consider it bullish, but is it bearish.... If we use Lunar cycles, we should have a trend change to the downside through Monday... Barry

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Solid rules couldnt agree more, you wrote the rules very well and very clearly. You have earned me as a new follower of your blog.

Edited by crew123, 15 April 2010 - 10:19 AM.

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NAV, thanks a TON for the tips and I too will follow your blog. Good stuff here on TT as always.

u-barack