The Universal Tactics of Successful Trend Trading: Finding Opportunity in Uncertainty (Wiley Trading)

Swing Breakouts Dow Theory (1900)

A variable is assumed to be normally distributed where: 68% of all values should fall within one standard deviation of the average, 95% of all values should fall within two standard deviations of the average, 99.7% of all values should fall within three standard deviations of the average and 99.9% of all values should fall within four standard devi

The two key weapons against ROR are money management and expectancy.

You will need to employ appropriate money management. You'll need to trade small relative to your risk capital. You will need to ensure your risk‐of‐ruin (ROR) is at 0%.

FIGURE 3.1 There is a vast array of techniques within the universe of trend trading.

One metric I use to gauge tradability is the R‐squared calculation. It measures how close an equity curve fits a regression line. A 100% reading suggests the equity curve is very smooth, representing a straight line. A low reading suggests the equity curve is very bumpy and difficult to trade. I generally prefer strategies with 90+% R‐squared readi

I do use some indicators in my strategies such as the average true range and moving average indicators; however, as a general rule, I'd prefer to deal with 100% price. The big problem with variable dependent indicators is that they usually lead to equity curve instability, a situation best avoided.

There is no sidestepping, ducking or ignoring ROR. It's an immovable and immortal force that will not be ignored or denied. It exists, it's real and it's fatal. If we unpack ROR we can break down the fault into the two key weapons against ROR, money management and expectancy. Poor money management: Most people over trade their account failing to us

FIGURE 7.1 Traders need to know a strategy's return per unit of risk to gain an insight into how returns are generated.