kleenup2 said...
Carl, you are kidding when you asked how will we know when the trend is up aren’t you? Anyone with even the most primary knowledge of trading or basic chart reading knows how to draw a trend line on a chart. A downtrend is considered valid until a higher low forms and the ensuing advance off of the higher low surpasses the previous reaction high. As long as prices remain below the downtrend line, the downtrend is solid and intact. A break above the downtrend line merely indicates that net-supply is decreasing and that a change of trend could be imminent. But simply stated an uptrend is defined as a series of higher swing highs and higher swing lows on whatever time frame that you happen to be following. The greater the time frame the greater the relevance of the trend. The trend on the monthly, weekly, and daily charts is down. I do believe you are letting your detractors get under your skin and you are letting your emotions and pride cloud your judgment. I used to have a blog as well and the nay-sayers can effect your objectivity.
My dear Kleenup:
Thanks for instructing me on methods for trend identification. I’ve be trading markets for forty years and don’t understand why I haven’t heard of them before.
Thinking about the methods you describe has led me to a number of questions for which, perhaps, you may have answers too:
- How do you recognize a high or a low on the chart in a way you could program for a computer?
- Having found a way to define highs and lows, which ones do you use to draw trendlines?
- What do you do when the market breaks a trendline or moves past a previous high or low?
- Why do you believe that you can make money using the answer to question 3?
Cordially,
Carl
15 comments:
Carl -- take a deep breath and relax. Your tongue and cheek response to "Kleenup" illuminates more light on your state of mind than his "ulterior" motives. I commend you for having the courage to attempt to forecast the S&P; however, I find your proclamations incomplete. I have yet to find where you actually specify a risk adjusted strategy (e.g., entry criteria along with stop loss and money management). If you actually do use these in your trading, then your blog is a sham at best. Otherwise, I encourage you to think through these and contemplate how this would alter your blog/comments. And on the off chance that your reply to "Kleenup" was genuine, then I suggest you refer to someone who actually publishes their track record, such as Ray Barros for identifying trends.
Best Regards,
Dan
I do not program trade Carl. I do my due diligence, analysis, and risk management prior to ever entering the trade. I haven't traded for 40 years due to the fact that I am only 33 yrs old. I see that you have your educational background listed at the side of your blog...I have my BBA and MBA from Emory University’s Goizueta Business School. I have been a CTA(Commodity Trading Adviser) formerly traded commodities for Lind-Waldock and subsequently became a trading trainer once I left the pits of the CBOT. I then took a position with Bank of America's trading desk in 2002 where I met my lovely wife. I began my own commodity trading business in 2005 and I am happy to say that I am still in the game. I do teach part time for a trading school here in Charlotte, NC...with your permission I will advertise it if you like.
I do not define the highs and lows...the market does. The high and low on a chart are a definite points...the areas that you call support and resistance are only areas of "potential" support and resistance. My primary trading methods are breakouts, gap fades, exhaustion reversals, range trading, and measured moves. My primary markets are the ES, TF, YG, ZB, TY, ZC, and the ZW.
As for why do I believe that I can make money using my methods, simply stated my PNL says that I do make money using my methods. I trade in 10 car lots and my primary objective is to give myself the best chance of being profitable. I do not trade breakouts because it is easy to be right...I trade breakouts because it is easy to know when I am wrong. If we break below the previous day's low in a downtrending market I will go short every time(although I am usually short well before that occurs). Breakouts are accompanied by increased volume in the direction of the breakout and one's profits are quickly realized and should be protected. I too have studied George Lindsay,Nicolas Darvas, John Murphey, and Elliot Wave ;however, I realize that the most important part of trading is risk management regardless of the methods you choose. There are only a few rules that traders live by: 1. Plan the trade and trade the plan, 2. The trend is your friend 3. Cut losers quickly, and the most important of all...4. Never let a winner turn into a loser.
I always enjoy a good battle of wills and wits. Keep up the good work and as always...I enjoy your blog. My email is kleenup2@gmail.com if you would like to discuss ideas or converse outside the blog.
Good on you kleenup2!
Nicely articulated position. I guess you use daily charts to determine trends?
Rick B
Carl you are the man! I love your writing style and can't wait to buy your book when it comes out. Thanks for expressing your thoughts on the market every day!
Carl,
The stress identified from everyone seems to indicate we may be reaching a bottom here.
Btw I have tried to respectfully disagree with you for about a year that we are in a bear market. I still think that is true. But bear markets do have rallies.
About Me
Name: Carl Futia
This is my financial forecasting blog. I'll explain what I see ahead for the stock, bond and various commodity markets.
I thoroughly enjoy reading your blog and comments due to my background in economics and business. If you will notice I have never posted a trade on your blog because you explicitly stated that this is a financial forecasting blog...not a trading blog. I have many friends that trade for themselves as well as many others that trade for institutions and most could care less about the economy or the financial landscape. I also do not post trades because I am a registered CTA and it would be a conflict of interest as well as a breach of professional ethics for me to do so.
To Rick B,
I use multiple time frame analysis to determine areas of confluence that will offer me the high probability trades that my trading plan requires and that also allow me the reward to risk ratio of at least 3:1. I use the monthly, weekly, and daily charts for trend and intra-day time frames for my entries and exits.
Carl,
This is pure gold. Keep up the good work !
Tamas
PS.: what happened with the 3 peaks and a domed house ?
anyone that follows a trend is always late to get in and always late to get out... trend following guarantees you will miss the top and the bottom. so trend traders lose money at the turning points.
Change of trend .....
How about watching the 60 (or 30) min S&P emini for a 1-2-3 bottom.
Ignore longs until at least point 2 is broken to the upside. Granted you may not 'catch' the ultimate low but at least your going with the short-term trend.
Kleenup:
I disagree with your trend analysis if i am reading it correctly... A change in trend is not based on ONE higher low or ONE lower low... If you are basing it on that, then you must get whipsaws and reversal every time... I base a trend reversal on 2-3 higher lows and lower lows... If you look at the action of the highs of 2007, after the first lower high you cannot tell me the trend has changed, hindsight yes, but to get a confirmation of a change in trend, after the second and third lower highes we got confirmation... You may say you are late to the game, but i disagree because their was still time to make money from the second lower high and even the third lower high... Unless you are a day/swing trader, you do not short from the first lower high and hold until now, because then you would be classified as a postion trader...
ex
Kleenup:
If you are taking a trade on the FIRST higher low or lower low and think that is a trend reversal, then you may need to go back and re-visit basic charts yourself!
I would not trust ONE higher low or lower low as a trend reversal... Most traders wait for some confirmation on trend reversals, so they dont get caught in a whipsaw or stops getting hit... You can look at any time frame and see that it is very easy to get stopped out on ONE higher high or lower high expecting that its a trend reversal...
If you are a daytrader like you say, the lunch hour is a perfect example of choppy markets that reverse on a dime... Im sorry but I disagree with your analysis of trends!
ex
the programming question has nothing to do with whether you program trade. It is a litmus test, if you can turn your strategy into a program then it is unlikely to rely on fallible outside fuzzies such as instinct or experience. Trends and chart patterns are very hard/impossible to parse with a program.
Ex...why would a day trader bother trading during chop time(lunch)? My trading day is generally complete well before 11:30 am EST. It is amazing how poorly people fail to read or comprehend what is written when all they seek to do is find fault with the author. Notice I used the word "imminent" when referring to a trend change and that I also used the word "potential" when referring to areas of support and resistance. I do not wait on confirmation of a trend change to tell me that the trend has changed. Notice that I said I do multiple time frame analysis so what may be an uptrend on a 5 min chart may simply be a retracement of the primary trend on a larger time frame chart such as the hourly. I look for areas of price confluence on the various time frames to give me an edge on how price will react once a level is reached. Of course it will be virtually impossible to detail exactly all that goes into a trade decision in such a forum, but do remember that with my background as a former pit trader we did not have charts, indicators, trend lines etc. All we had was price action and volume to base our trade direction and position size. I am a more aggressive trader and I know the action and rhythm of the markets I trade. My best qualities have nothing to do with trading but are personality traits...I am decisive and I am disciplined. I can give you the text book definition for basically any technical analysis phrase but none of that gives a trader an edge when you have 20 - 50 contracts open.
As for program trading...the hedge funds with the biggest losses have all been quant funds. I am not of the school that believes a computer can do anything better than man. If I believed that a program trade would be better I would have an auto-traded account and just play golf and tennis all day.
Enjoying the discourse guys..but now it is time for me to hit the gym.
I enjoy Carl's blog because his box theory is original. I don't enjoy the trading component. I'm sure others would agree with some similar generalizations. First off, it's a diary of trades. That's it. There is nothing about risk management, position sizes or any other important requirements of trading. In other words, most of the blog is rote. Carl, I've asked before to explain some of your thoughts, reasoning and risk management strategies and you have refused with the rationale that it takes too much time.
Your call. YOur blog. But, you lose readership because of it.
Dear 9:57 pm:
I believe in evaluating facts before reaching conclusions. My readership has doubled during the past three months to the highest level since the blog started in 2005. This blog is rated 13th globally by page views among business and investment blogs by Gongol (http://www.gongol.com/lists/bizeconsites). These facts do not support your assertion that I lose readership because of my content choices.
So, while it saddens me to lose you as a reader, I think I have read the market for my blog content more accurately than you have.
Post a Comment