The following observation or question occurred between two traders name khamore1 and bobcollett
@ Traderslaboratory.com when bobcollett gave advice about his trade strategy.
Quote:
khamore1
Bob, I want to thank you for your advice and I need further assistance from you,
your strategy works only in a ranging market but not in a trending market, since 80% of the time the market is ranging your strategy will work within that percentage, but how you handle the trending market, the other 20%?
I used your strategy for a while and I was making a $1000 a day before even taking a lunch, the problem is I was losing $10,000-$15,000 a day when the market was trending
Here I need your advice, how you know it’s going to be a trending day to switch this strategy?
I decided to reply to their conversation with my own advice via stating the following...
There are many threads or messages here at Traderslaboratory and other forums that traders explains how to recognize
range price actions and how to recognize
trend price actions.
Thus, if you know your trade signals performs poorly in trend price actions...you have several options:
#1) Identify its a trend in its early stages and then ignore any trade signals to trade "against" that trend.
#2) Identify its a trend and then lower your position size, tighten your stop loss and lower your profit expectation if you don't have the discipline to ignore trading trend price actions.
#3) Identify its a trend and use a different trade method that's suitable for trend trading. Thus, you have a trade method for range price actions and a trade method for trend price actions...overall two different trade methods for different types of market conditions.
With that said, most trends or strong directional price actions are the result of key market events (e.g. FED, IMF, ECB, Economic Reports, Global Economic Events and anything else along that path). Therefore, if you want to know when a trend has a chance of developing...you need to pay attention to those schedule key market events and the unexpected breaking news key market events.
Just think, you're losing 10k - 15k per trending day...you have great incentive to pay attention to how the price action
reacts to these key market events. Also, it doesn't matter what the specific details (numbers) of the key market event...what matters is that you know there will be a price action reaction and that there could be a trend developed from the event. Simply, if price reacts and breaks outside of your identified range price action...you will then know which of the above options to use (#1, #2 or #3).
Also, if I was in your shoes and I knew I only make 1k on range days and lose 10k - 15k on trend days...I would start my own thread here at Traderslaboratory, post a lot of charts of what I consider to be range versus trend, discuss my trade strategy (from entry to exit) and ask for help in comparison to starting these types of discussions within a thread that has a completely different topic.
You must be rich and can afford losses like that because there's a lot of trend days in any given year, 20 - 30% per month or 1 - 2 per week depending upon the trade instruments you're trading or the numbers you mentioned are via simulator results.
Attachment:
020412-Why-Trends-Occurs.png [ 114.3 KiB | Viewed 608 times ]
http://www.traderslaboratory.com/forums/support-center/11872-why-majority-traders-lose-2.html#post138340 Best Regards,
M.A. Perry
Trader and Founder of
WRB Analysis (wide range body/bar analysis)
@
http://twitter.com/wrbtrader http://stocktwits.com/wrbtrader http://chart.ly/users/wrbtraderhttp://www.thestrategylab.com Phone: +1 708 572-4885
Business Hours: 8am - 5pm est (Mon - Fri)
Skype Messenger: kebec2002
questions@thestrategylab.com
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