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Australian SPI 200 Futures market dynamics

  #8 (permalink)

Germany
 
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Harveys View Post
I use a basic swing trading method.It is a trend following method,basically buying the 50%retracement level once an intraday trend is established.The problem is having done hundreds of trades I get stopped out most times.The trend just changes as soon as I enter.Not just the SPI,but all markets that I have traded over several years.Why?

There are at least 2 points that leap to the eye:

a) intraday trend following: Most equity markets worldwide are struggling with the lowest volatility since
the start of the VIX or - by other gauges - since the all-time lows of 1964. So with the exception of 1964 (so far)
the preconditions for your basic method have never been worse intraday than during the last few years.
b) confirmation: Filters (like e.g. retracements) further reduce the quality of the trades. You piggyback on older,
more mature intraday moves in an extremely mean-reverting environment.

a) is fairly typical for traders who either don't meet the capital requirements of trend following and/or don't realize
that trend following normally plays out in the long term, not in intraday noise dabbling.
b) regularly follows a lack of risk acceptance / capacity. Because of undercapitalization and/or loss aversion some
traders wait "until everything falls into place" - with devastating effects for their P&L since they are the ones who
buy when earlier/better (capitalized) traders sell and vice versa.

So the best advice imho is that you a) match your risk acceptance with your capital and b) start treating the
markets for what they currently are - not for what you want them to be.

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