Throughout my trading career, two things of have stuck in my mind that I learned a long time ago on the floors of the Chicago Mercantile Exchange. I was trading for my own account and a select few customers in a space that was both hostile and friendly at the same time.
The first was, "the trend is your friend." Trends tend to persist longer than most people expect. Just look at the recent bullish trend in the equity markets that has been going on now for six years. By any mark in history this is an old and tired bull market. Only one time in history did a bull market trend ever extend to seven years. As they say when you climb Mount Everest, we are now in thin air.
"The trend is your friend" is an amazing thing to remember when you are trading because that is where the big money is made.
The next saying I learned as a young trader in the pits of Chicago was, "when in doubt get out." Sometimes you get a gut feeling in your stomach that things just aren't right. We all have emotions and feelings which sometimes get the better of us when we are trading and in many cases can work against us in the trading arena. However, there can be times when they serve you very well and I believe we're in one of those times.
Arthur Cutten, a legendary speculator in the 1920s, was once asked, "What is the hardest thing about trading?" And he answered, "holding on to a winning position." The temptation to take profits off the table too early in a move is very real. One of the worst feelings in the world, and I know because I've been there, is to take your profits too early only to see the market continue higher. Then you say to yourself, "I will wait for a pullback, because it's just too high right now." When the pullback does not occur and the market goes still higher, you get less and less confident of putting on new position and therefore miss the major part of the move. This is the part of the move that can make your year.
That is the huge advantage that our Trade Triangle technology has over an emotional, gut-based trading approach. The Trade Triangles determine the trend and stay in the trend as long as the trend remains intact. We had a major trend change in the DOW on June 30th, that was 2 1/2 months ago and a 1,000 points higher from where the market is trading now.
I still see no reason to get excited about the long side of this market, it is just too early to be trying to pick a bottom right now. Relax and let the Trade Triangles do what they do best and let them show you when a bottom is in place.
For those of you that missed yesterday's post about how the Trade Triangles beat out the billionaire hedge fund managers, you may want to check it out here.
Just remember, the trend is your friend.
Every success with MarketClub,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
