Those of you who know me well know I read any course I can get on trading methods and styles and I ran across a good one the other day. Unfortunately for most of my readers this style of trading the markets is not legal in the US but man the course was worth the read. There is a firm in the UK that has spent gosh knows how many hours dissecting futures contracts and have developed a system called trend trading. I have to say I was absolutely fascinated by their course and honestly wished I could get in on those markets. Here’s a little bit about what the course teaches and what the current read on markets is – and again… I’m just finding it fascinating to watch it unfold.
What Is Trend Trading
Trend trading involves the deep statistical study of markets at the individual asset level. Researchers statistically analyze both short and long term trend lines and historical trading ranges in order to define typical trading characterists of that asset. Assets are then bought or sold according in a structured way to try to land big winners and cut losses quickly.
How Does One Use Trend Trading
Trend trading is very structured, and designed to win the war despite more likely losing more battles than winning. It is not particularly a churning trading system, but more along the lines of a “if/then” type of trading pattern using a single position on a limited number of securities. Winners are ridden until trending signals reversal. Losers are ditched quickly if pricing drops out of range (exit stop hit). Profitability is achieved when the size of the fewer winning trades is greater than the size of the more losing trades. Results of the system appear to be pretty good from what I’ve seen, and again I wish I could take advantage of it but – as previously mentioned this type of trading is restricted in the US – but my non-US readers can go for it as far as I’m concerned. Wish I could join ya!
What Does Trend Trading Say about the Current Futures Markets
Currently the interesting cross pairs in the futures markets appear to be USD based. The trend signals trading outputs for the week have signaled opening positions predicting USD strengthening in the futures market. This bodes ill for those anticipating a market rise into the holiday season. That isn’t to say markets can’t turn around but unless the USD strength trend predictor is found to be invalid we could be looking at a few weeks of S&P 500 pain. Interested readers can get more information on the trend trading signals system or drop me a note in the comments section. Believe me it’s an awesome read and I’d sure love to try it.