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

FIGURE 8.1 Creating portfolios based on independent and objective criterion such as diversity and liquidity avoids data mining.

Swing Breakouts Dow Theory (1900)

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

Do you build new strategies to diversify or reduce the risk of individual strategy failure? Certainly, and that is what I do. I trade a portfolio of uncorrelated but complementary (trend/counter‐trend) strategies over multiple time periods (short, medium, long term) over a diverse portfolio containing 30+ markets. However, there is no reason why I

four very important observations about trend trading. It's the safest way to trade—to trade with the trend. Trends move markets and are the basis of all profits. It's miserable being a trend trader, you lose on 67% of your trades! Two popular ways to trade with the trend include: trade breakouts or trade retracements.

In a nut shell, Dow Theory believes higher highs and higher lows represents a trend up while lower highs and lower lows represents a trend down. For ease I'll refer to his peak‐and‐trough trend analysis as simply ‘Dow Theory’. Let me summarize the mechanical Dow Theory (peak‐and‐trough trend analysis) rules. Rules Strategy: Dow Theory Developed: Un

These strategies provide a good representation of the different approaches traders can use to trade with trend. Model Type Published Port. Net $$ Trades Avg $$ Brok/Slip Random Trend Trader Coin toss 2020 P24 −$61,957 31,953 −$2 −$51 Hearne 1% Rule Relative price ROC 1870 P24 −$2,056,953 59,294 −$35 −$51 Gartley's 3- and 6-Week Crossover Relative p

Trend trading relies on three golden tenets: follow the trend, cut losses short and let profits run.

The two most popular approaches to trend trading include: Trading breakouts in the direction of the trend: never miss a big trend and use larger stops. Trading retracements in the direction of the trend: can miss big trends and use smaller stops.