<![CDATA[Nick the Trader Guy - Trading Blog]]>Sun, 12 Mar 2023 07:26:57 +1100Weebly<![CDATA[Backtesting]]>Mon, 27 Feb 2023 11:03:12 GMThttp://nickthetraderguy.com/trading-blog/backtestingWhy Do it?
This is probably going to be a fairly small post, and perhaps a little stream of consciousness, but we'll see where we end up. 

Like most traders, I realise the importance of doing backtesting and right now I'm investigating a swing trading strategy. The backtesting process is pretty labourious, but its better to test to a strategy on paper or in a spreadsheet or via real money. The why is really so that you can test something and see if it works. 

At this point I've backtested 5 trades and so far its not looking like a good system, but we'll see where we get to.

How to do it?

For me, I back test in a spreadsheet, I've build a pretty good one now, which does a lot of the calculations for me. 

I then set up an appropriate chart in trading view and go from there, using the replay setting to see how the system goes. 

My current chart looks something like this one, its pretty basic but it does the job. 
Picture
In terms of iterations, whilst right now I'm a little disappointed with the systems performance, I'll give it a few more trades before I rule it out. Thus far the system is only showing a 3% drawdown, so thats too early to rule it off, I may have just picked a really crappy time period.

Stay tuned for the outcome.

Nick the Trader Guy
​Feb 2023
]]><![CDATA[Trading - when to sit out]]>Wed, 08 Feb 2023 10:18:39 GMThttp://nickthetraderguy.com/trading-blog/trading-when-to-sit-outAs a trader, making the right decisions at the right time is fundamental for our success. There are times where the best decision can be to sit out of the market and not take any trades. To me, right now is one of those times. I base this decision on the fact that we are in the midst of earning season and the market seems to be actively ignoring central bank policy, in short, it seems to be fighting the Fed.
  1. Reduce risk: One of the main reasons for sitting out of the market is to reduce the risk. When the market is uncertain or volatile, it is best to avoid making trades until there is more clarity and stability. This help to prevent you from making impulsive decisions based on emotions. - Which is one of the critical errors for a trader.
  2. Wait for better opportunities: By sitting out of the market, you have time to research and analyse the market trends and conditions. This will help you identify better trades and make more informed decisions. When the market conditions are favorable to your methodology, you can make trades with confidence, knowing that you are taking advantage of the best opportunities.
  3. Maintain perspective: Taking a break from trading can also help you maintain perspective and avoid becoming too caught up in short-term gains and losses. By stepping back and re-evaluating your investments and goals, you can ensure that you are staying on track and making decisions that are in your best interest.
To my mind (and Jesse Livermores + Many others) sitting out of the market can be a valuable strategy for traders. By reducing the risk of loss, waiting for better opportunities and maintaining perspective, traders can make more informed decisions and achieve their financial goals.
]]><![CDATA[Trading what's it get you]]>Wed, 18 Jan 2023 11:15:41 GMThttp://nickthetraderguy.com/trading-blog/trading-whats-it-get-youWell the simple answer in my case is freedom, not that I'm quite there yet but I'm working towards it.

That all being said, my trading journey to date has been full of ups and downs, and I reckon I'm still stuck in a boom and bust cycle. I suspect, as I alluded to in my last post this is because I try and do new things from time to time, even though I know my main system works, I've now got over 1,000 back test results over about 20 different symbols across a number of asset classes, it works. 

The psychology is hard though, particularly when your on a losing streak. 

So what do I do about it:
  1. Review the back test results
  2. remind myself that the system works
  3. look at 1 and 2 again.
Does it always work, no, but hey I'm only human. 

Any way thats it for now!

Cheers,
Nick the Trader
​Jan 2023
]]><![CDATA[So where to now]]>Tue, 10 Jan 2023 10:19:11 GMThttp://nickthetraderguy.com/trading-blog/so-where-to-nowI'm just going to freelance this one a bit today, Akil Stokes style and just write what I'm thinking.... could get interesting...

Anyway its been a while since my last post, a long while, I've had a lot going on outside trading which has sucked up most of my attention.

Anyway, I'm now going to try and update more often, with shorter posts detailing my journey as a trader. Because like all of us, I still make plenty of mistakes, usually not expensive mistakes now (well at least not too often), but they happen. 

One of the mistakes I seem to routinely make is wanting to hunt around for new systems all the time or tweak things or make adjustments, even though I know through my backtests my system is profitable. For me most recently, I thought, hmm what if I put in a take profit where I take out 50% of position when I hit certain ATR multiples. Seems like a great idea right... 

Well I did the backtests on it and you know what it showed, it showed that it produced very similar results to just letting my system do its thing, if I'm honest the tweak made it slightly worse, although it did reduce the average losses and improve the win rate. At least I had the smarts to only backtest it and not test with a live account - thats another mistake right there, maybe for another post! 

Anyway happy trading, 

Cheers,
Nick the Trader
January 2023.
]]><![CDATA[tRADING vs iNVESTING]]>Mon, 04 Oct 2021 10:23:04 GMThttp://nickthetraderguy.com/trading-blog/trading-vs-investing
So I've been getting myself into a few discussions online lately which largely stem from a difference of opinion around different methodologies for engaging with the markets.
Before I start off let me be clear, I have nothing against any particular method of engaging with the market. Be it long term buy and hold, fundamental analysis, technical analysis, trend-following, chart patterns, fibonnaci numbers, all these methods have adherents and basis for them to be correct. Some would probably argue that they all can't work because some of them are mutually opposed, think fundamentals and trend following. And some would argue all forms of technical analysis are bunkam and voodoo and they shouldn't work. From what I've read and understood, this viewpoint is often based on the Efficient Market Hypothesis/Theory, and that there is no edge for an individual in the market, as it's all "priced in".

In my opinion, the biggest flaw in the efficient market hypothesis is that humans are rational participants in the market. They are not. If they were would things like the GME short squeeze happen, would pump and dump schemes work or would trend form? I'd argue not.

Anyway, I digress; I think when discussing different approaches to the market, the critical differentiator seems to be timeframes, activeness and goals. The comments below are intended to be general in nature and reflect my opinion. I don't recommend anyone use the below to decide how to approach their market participation 😊. I'm also only going to talk about 3 views here, basically to stick within my swim lane.

For someone who wants to have limited involvement in their "investment", has a long time horizon and just wants to see steady growth, perhaps buy and hold suits their goals and temperament. There is nothing wrong with buy and hold, it's got a proven track record, and it's relatively easy, even more so with index-tracking ETFs which remove a lot risk (company-specific risk) for an investor. To my mind, it's just not a terribly efficient way of using capital to grow your wealth. Essentially the edge for this methodology comes from the long bias of the markets overall. However, depending on your timeframe, this may or may not work in your favour. I.e. you need the capital invested when the market is down. However most proponents of this methodology will say only invest what you can afford to lose as a risk management technique, which is fine.

If someone wants to actively manage their investments, pick their stocks has some time and perhaps something like trend following might be suited. Mainly using daily and weekly chart bars. For me this method seems to be a good balance between managing your investments, managing risk and efficiently using capital. What I mean by this is that if you use a longer-term active system/method, you're likely to be using position sizing and risk management techniques.

​For many traders, including me, I think the starting point is as a day trader. I suspect this is for several reasons, among them that movies and tv shows that feature trading tend to focus on day traders and secondly, brokers want people to day trade. Why because most day traders over trade and generate lots of profit for the brokers. Anyway, this isn't to say that day trading can't be profitable, but in my experience it takes lots of time (both at the screen and learning the trade) and experience to make it work for you. It's certainly not going to make you rich quick.

Personally, I have chosen to build my methodology around trend-following, partly because Covel's Trend-following was the first trading book I read and partly because it just made sense to me. However, as I have gained skill and experience, I have realised that managing my investments requires less time in front of the screen with a longer term trend following system. As I've said before, my screening process takes around an hour to an hour and a half each weekend and maybe 20 minutes a night during the week. This is ideal for me currently as it allows me to work a job and to trade. I also include a bit of fundamentals in my analysis, essentially I just avoid trading around news events (particularly earnings).
So in my view, there isn't really a huge difference between a trader and investor, particularly once you move outside the realm of day trading, its around the level of involvement. Essentially as far as I'm concerned, we're all in this to extract a profit from the market via an edge, and some us do it over the short-term, some over the long term.

Anyway I hope you've found this rant interesting.

Cheers for now.

​Nick the Trader
October 2021]]><![CDATA[Is it Time to Panic Yet?]]>Mon, 20 Sep 2021 10:51:28 GMThttp://nickthetraderguy.com/trading-blog/is-it-time-to-panic-yetWell it looks like panic is starting to set in again - but is really time to panic? Well in my opinion its never time to panic, but it may pay to start being cautious.

To be clear, this post is not a recommendation to buy or sell anything, its simply my analysis and opinion. 

At the time of writing (The evening of 20 September 21 - AEST) the predominate reason for the ASX being spooked today (around 2% drop) seems to be indicated as the either the Evergrande situation or iron ore dropping (perhaps both as I'm sure there is a nexus). Although there is some thought that it could be the movement on the US index futures (although maybe they're being influenced by the same thing...). As for a trend follower and technical analyst such myself the reason is pretty much moot, that being said, it does pay to pay attention to some real-world signals.

I have observed that often after a string of red days (or a single big red day), you often start seeing lots of bearish sentiment appear on various financial media and social media pages. It seems that as soon as there is a bit of a drop, the bears come out and start spruiking the bear case. These posts/articles tend to suck people in and start to set up a bit of a negative mindset. 

So ignoring the big news, let us look at the charts and see what they are showing. Let us start with the ASX 200 (XJO).
Picture
From the above chart, it looks fairly apparent that a downtrend has started forming, starting from the most recent high of 13 August. The chart shows that following the open on 14 August, the market failed to make a new high and started trending downwards for the following week.

Fairly solid resistance was then found at around 7460 on 19 August, with several retests until around 9 September (between these dates, the market seemed to be trading in a fairly tight 60 point range). On 9 September, the support level was broken. For the following week (until 17 September), the previous support level provided resistance, with another support offered around 7360 (the close on 9 September). 

Today's movements seem to pretty clearly break through that resistance, but we'll need to see what tomorrow brings. 

Other things that I note on the chart are the 20 and 50 days MAs, the 20 days MA will likely cross the 50 day (a bearish indicator in my view). 

Overall, the chart doesn't look particularly good for long trades, and I'm certainly reducing my capital at risk. I may start taking a few limited short trades at this point, but I won't flip to a full bearish position unless I see a confirmed break of the 200 day MA (currently around the 7000 mark). 

I think as I said up front, it would be prudent to be cautious at this point and I'll be refraining from taking full-size positions. 

Anyway, I hope someone found this useful.


Cheers
Nick the Trader Guy
20 September 21


]]><![CDATA[How I make Trading DecisionS (PART 1) - Instrument Selection]]>Sun, 12 Sep 2021 12:05:12 GMThttp://nickthetraderguy.com/trading-blog/how-i-make-trading-decisions-part-instrument-selectionPicture
First up, apologies for the long delay since my last post, life got in the way over the last couple of months. I'm still trading and growing my capital, so it's all good! 

As alluded to on the main page, in this post I am going to talk a little about my process (in broad detail).  I've got a few different entry methodologies that I use to identify trades. In this post I'm going to focus on my Breakout methodology. 

Part 1 - Instrument Selection (Breakout Methodology) .
When I first started trading, I'd simply choose a stock based on what was moving that day. There was no forward planning, no though beyond, "shit, that stock's moving today, I'll buy some shares and hope for the best." Needless to say this strategy was profitable in short term but horrible in the longer term 

These days, I plan all my stock picks in advance. Each weekend (usually Sunday night), I'll do a stock screen generally looking for stocks which have unusual volume and momentum. I then put this stocks on what I call my first cut watch list. I'll also do a similar screen of the futures markets, but I don't worry so much about volume with stocks, its more just momentum and trend.

Once I've populated my first cut watch list, I pull up my charts. I use a four pane set up in trading view looking at Monthly, Weekly and then 2 daily charts (one zoomed in and one zoomed out). I look for stocks which have been trending well in the past on the monthly and weekly charts and a clear trend on the daily (steady momentum in the trend direction). If I see this, the stock gets added to my Trade Watch List. From there I monitor the stock following the open on Monday and will generally enter a trade after the first hour of trade has passed. 

That it, I try and keep in simple with my instrument selection. All in all I spend about an hour a week reading the charts and determining trade set-ups.

​Here's an example of my chart set-up. You can see I keep my charts simple a few Moving Averages as indicators and a Bollinger Band for an indication of volatility.

Happy Trading

Cheers
Nick the Trader Guy
14 September 21

]]><![CDATA[My Favorite Trading Books]]>Mon, 31 May 2021 10:34:14 GMThttp://nickthetraderguy.com/trading-blog/my-favorite-trading-booksBlog Post
What books have I found have influenced me most
 
Firstly, apologies to you, my readers, for how long it's taken to post this. I've been busy with life, and the blog has had to take a back seat for a week or so.
 
I've meant to write this post for a while, but I keep getting sidetracked
By current events or the like. So finally, I'm going to get down to it and write about some of the books that have most influenced my trading style.
 
Whilst I list a few in my trading resources section. I wanted to go into more detail about what books have really influenced me and why.
 
I'm going to start off with some of the most recent books I've read. The most recent books I have read which are the which are the Laws of Wealth and The Behavioural Investor by Daniel Crosby.
I'm going to talk about them together as:
  1. I read them consequently
  2. They cover a lot of the same ground.
Both books really study why the traditional investment model is flawed and why humans generally suck at making investment decisions. Hint, it's because we let our emotions get involved.
 
I've found both books fascinating, and there are many references to other greats of behavioural finance, something I've had experience in my professional (non-trading) career. One of the takeaways for me in both books is that trading is hard because we try and overcomplicate it. So for me, it has caused me to reduce the number of indicators and factors I use to analyse the market. So far, this has been yielding results, but we'll see what happens over time.
 
The next book I'm going to mention is Mike Covel's Trend Following. To me, this is really the bible for a systematic trader. It really changed my approach to the markets and broadened my horizons. Before reading this, I was a haphazard trader who tried to trade off daily momentum. My downfall was I had no idea about risk management and position sizing. I just took big positions and hoped for the best.
 
The most significant influence from this book was that systematic trading works, and that whole Efficient Market Hypothesis is complete bollocks. After reading this book, I stopped holding losers. I started setting stops and diversified into different markets (futures, FX etc.). The other key change for me was that I stopped listening to financial news and media for making my decisions. Ultimately I decided that fundamentals were irrelevant for my trading style. One of the things I like about Covel's book is that he provided real case example of people who have succeeded using trend following. I particularly would like to emulate John W Henry and Bill Dunn in my trading career. I'm a real convert to the model, as you can tell!
 
All in all, I'd credit Mike Covel's book with starting me on the journey to profitability, I still had a lot to learn following this, but it was really the thing that changed my approach.
 
The third major book for me was Trading in the Zone by Mark Douglas. This book was probably one of the best trading books I've ever read. It really walked me through the process of how to become a consistently profitable trader. I read this one after quite a few other ones, which allowed me to really appreciate the book and its message. This book was my primer to understanding the psychology that was driving my trading behaviour. It allowed me some introspective into my personality also. The real big thing that came from this book for me was how I manage my psychology and really outlined the importance of developing an approach that took me and my emotions outside of the decision-making loop. I still regularly do the quiz at the front of the book to track how I'm going.
 
A further great pair of books that have influenced me are Steve Burn's New Trader, Rich Trader (both one and two). To me these books are really good at explaining the journey that traders take on their way to success. I found myself thinking throughout the books, hmm that's precisely what I did or felt. To me these books reinforced some of the painful lessons the markets taught me and allowed me to improve on my trading style and technique. I'd highly recommend these books for a new trader. The biggest message from this book for me is that if you trade 1% risk each trade is only one of the next 100, it makes the psychology so my easier to manage!
 
The final big one for my is Alexander Elder's trading for a living. Dr Elder work is a really interesting perspective, he's a psychiatrist by background and provides some really valuable insights into trading. The thing that I really took away from the book is to use different time frames to analyse the market behaviours. This has improved my trading a lot as it helps filter out the noise and refine entry and exits.
 
Other books which have I've found useful are:
Jack Schwager's market wizards series. To me these highlights that being a successful trader can come from any number of methodologies and there is no magic formula for being successful (at least in terms of trading style). The magic formula is really how you approach the market and how you manage yourself.
 
Some more excellent books are any of Steve Burn's trading explanation books. These are usually nice short books that explain specific ideas and concepts such as Moving Averages, Psychology, Risk Management etc. I've found these books excellent for re-enforcing messages I've read elsewhere.
 
There are a lot of other books I have read, but these really are the summary. If you have any questions or want to know more, hit me up on insta or via email (or leave a comment below).
 
Once again, thanks for reading.
 
Happy trading.
 
Nick the Trader Guy
May 21 (just…).
Blog Post
What books have I found have influenced me most
 
Firstly, apologies to you, my readers, for how long it's taken to post this. I've been busy with life, and the blog has had to take a back seat for a week or so.
 
I've meant to write this post for a while, but I keep getting sidetracked
By current events or the like. So finally, I'm going to get down to it and write about some of the books that have most influenced my trading style.
 
Whilst I list a few in my trading resources section. I wanted to go into more detail about what books have really influenced me and why.
 
I'm going to start off with some of the most recent books I've read. The most recent books I have read which are the which are the Laws of Wealth and The Behavioural Investor by Daniel Crosby.

I'm going to talk about them together as:
  1. I read them consequently
  2. They cover a lot of the same ground.
Both books really study why the traditional investment model is flawed and why humans generally suck at making investment decisions. Hint, it's because we let our emotions get involved.
 
I've found both books fascinating, and there are many references to other greats of behavioural finance, something I've had experience in my professional (non-trading) career. One of the takeaways for me in both books is that trading is hard because we try and overcomplicate it. So for me, it has caused me to reduce the number of indicators and factors I use to analyse the market. So far, this has been yielding results, but we'll see what happens over time.
 
The next book I'm going to mention is Mike Covel's Trend Following. To me, this is really the bible for a systematic trader. It really changed my approach to the markets and broadened my horizons. Before reading this, I was a haphazard trader who tried to trade off daily momentum. My downfall was I had no idea about risk management and position sizing. I just took big positions and hoped for the best.
 
The most significant influence from this book was that systematic trading works, and that whole Efficient Market Hypothesis is complete bollocks. After reading this book, I stopped holding losers. I started setting stops and diversified into different markets (futures, FX etc.). The other key change for me was that I stopped listening to financial news and media for making my decisions. Ultimately I decided that fundamentals were irrelevant for my trading style. One of the things I like about Covel's book is that he provided real case example of people who have succeeded using trend following. I particularly would like to emulate John W Henry and Bill Dunn in my trading career. I'm a real convert to the model, as you can tell!
 
All in all, I'd credit Mike Covel's book with starting me on the journey to profitability, I still had a lot to learn following this, but it was really the thing that changed my approach.
 
The third major book for me was Trading in the Zone by Mark Douglas. This book was probably one of the best trading books I've ever read. It really walked me through the process of how to become a consistently profitable trader. I read this one after quite a few other ones, which allowed me to really appreciate the book and its message. This book was my primer to understanding the psychology that was driving my trading behaviour. It allowed me some introspective into my personality also. The real big thing that came from this book for me was how I manage my psychology and really outlined the importance of developing an approach that took me and my emotions outside of the decision-making loop. I still regularly do the quiz at the front of the book to track how I'm going.
 
A further great pair of books that have influenced me are Steve Burn's New Trader, Rich Trader (both one and two). To me these books are really good at explaining the journey that traders take on their way to success. I found myself thinking throughout the books, hmm that's precisely what I did or felt. To me these books reinforced some of the painful lessons the markets taught me and allowed me to improve on my trading style and technique. I'd highly recommend these books for a new trader. The biggest message from this book for me is that if you trade 1% risk each trade is only one of the next 100, it makes the psychology so my easier to manage!
 
The final big one for my is Alexander Elder's trading for a living. Dr Elder work is a really interesting perspective, he's a psychiatrist by background and provides some really valuable insights into trading. The thing that I really took away from the book is to use different time frames to analyse the market behaviours. This has improved my trading a lot as it helps filter out the noise and refine entry and exits.
 
Other books which have I've found useful are:
Jack Schwager's market wizards series. To me these highlights that being a successful trader can come from any number of methodologies and there is no magic formula for being successful (at least in terms of trading style). The magic formula is really how you approach the market and how you manage yourself.
 
Some more excellent books are any of Steve Burn's trading explanation books. These are usually nice short books that explain specific ideas and concepts such as Moving Averages, Psychology, Risk Management etc. I've found these books excellent for re-enforcing messages I've read elsewhere.
 
There are a lot of other books I have read, but these really are the summary. If you have any questions or want to know more, hit me up on insta or via email (or leave a comment below).
 
Once again, thanks for reading.
 
Happy trading.
 
Nick the Trader Guy
May 21 (just…).
]]><![CDATA[Blog #8 - I ignored my own advice and what did I learn]]>Tue, 18 May 2021 11:14:20 GMThttp://nickthetraderguy.com/trading-blog/blog-8-i-ignored-my-own-advice-and-what-did-i-learnThis isn't quite the post I thought I was going to make, but I feel this is more interesting and probably useful. TLDR; I ignored my own advice but learnt from the experience.

So last week, I made a post about how the moves last week were just a pullback and nothing to be concerned about. Really just part of the standard procedure for the markets after the big run-ups we had.

​This week I have to admit that I didn’t completely listen to my own advice. By last Thursday, I became somewhat convinced that the markets were on their way to correction or worse. Even someone who has been trading for a while can be influenced by their emotions, despite being aware of them, guarding for them and generally trying to ignore them. In summary, managing emotions is bloody hard. And having a plan, knowing your emotions and trying to manage them isn’t always enough.

So what did I do? Well, I can say that I didn’t panic sell any of my positions or even adjust my stops (which for most of my US positions was great, as they recovered on Friday – 14 May).
So what did I do? I ended a couple of defensive option positions to hedge my positions. To some of you reading, your probably thinking, what’s wrong with that. Seems like a sensible precaution to an unstable market. And to some extents it was.
But what was wrong with the trade:
  1. It wasn’t in my trading plan.
  2. I entered the positions (put options) at the low point.
  3. I let fear get the better of my and let it over ride my trading plan.

At the end of it, I wasn’t too costly a mistake as I still ensured that I position sized correctly (always harder with options, on this occasion I used around 2/3 loss stop – which with options is not guaranteed) and didn’t over do it.

Let me be clear, despite my risk management they were still bad trades.

So what did I learn.
  • Don’t get carried away with your own analysis….
  • Even if you think your managing your emotions, they can still get the better of you.
  • Remember your trading plan and follow it; always, it is there to protect you from making dumb mistakes.

So what steps have I put in place to stop this from happening again?
  • I’ve reviewed and rewritten parts of my trading plan.
  • I’ve reframed how I look at open profits (more on that below).
  • I’ve put a note on my corkboard in my office to remind me that the only good trade is one in the plan.

So more on that second point. Recently I’ve been reading more on behavioural investing; specifically, I’m now reading Daniel Crosby’s first book. One point in so far that has really struck a chord with me is this. When you think of giving back open profits as a loss, it affects your mindset and emotions, which can and does impact your trading.

What Daniel recommends is reframing this. Most of us who are on the journey to profitability have no problem taking a loss when our stop is hit when we first enter a trade. But it seems very difficult to take that same hit when we’ve had a big open profit. Crosby opines that this is essentially due to we’ve already counted those open profits, as profits and mentally treat them the same a realised profit. Therefore it’s much harder to take the loss. This is a mistake that I (and I’m sure many other traders) have made over the years.

To deal with this, a trader can shift their view of open profits to not consider it a profit until it’s realised (however, I should say here don’t do the same with an open loss, just cut that sucker). Personally, this reframing has allowed me not to worry so much about the givebacks, as they were never mine in the first place. As long as my overall capital is increasing, I’m happy!

Anyway, that’s enough for now.

Thanks for reading, and I hope you’ve found this interesting.

Cheers,
Nick the Trader Guy
May 21
 
 

]]><![CDATA[The Market as AT mid-may 2021 – No Time to Panic]]>Tue, 11 May 2021 12:48:53 GMThttp://nickthetraderguy.com/trading-blog/may-11th-2021Click here to This week's blog is a little bit different from the last couple of weeks posts. This week I'm going to focus a bit more on the current market.

I talked with one of my trading buddies earlier in the day around the US market declines over the last couple of days (on the evening of 11/5/21 AEST the US markets are down around 4% overall). It's a bit of decline, and you can see the tone of many comments across the various groups and forums I follow. There is a bit of panic setting in. My buddy made the observation that everyone seems to be looking for a reason to panic and sell because it's the expectation that the next big crash is around the corner. I suspect he has a point.

Anyway, I think this is a great observation and probably an insight into the psychology of the masses (I feel that I talk about psychology in every post, it must be getting a bit repetitive dear readers 😊). That being said, I think a pullback like this (at this point in time, there is nothing to suggest it's anything but a pullback) is an excellent opportunity to manage your positions and potentially open new ones. Keeping in mind the Oracle of Ohoma's wise words of "be greedy when others are fearful and fearful when others are greedy".

To keep things simple, I'm going to focus on my home market of the ASX.

Picture
The ASX (I'm using the XJO – S&P-ASX200) has just broken its ATH on Monday at 7172 (although I'm told if you add in dividends, we're actually quite a bit higher).

Todays 1% move down, essentially sees the XJO just slightly above Monday Open and around the high point of Friday. Nothing to worry about here.

In addition, the overall trend is still up and the Bollinger bands are starting to expand again after tightening last week.

To be honest, the ASX actually looks like it has broken out from a range it was stuck in over most of April.

All in all, I think these are pretty bullish markers currently. But I guess time will tell.
  
So what am I doing with this market.
You can see from my analysis that at least for XJO there is nothing much to be concerned about yet. I think today's (and likely tonights – 11 May 2021) will likely continue down, but unless we see a fall below the 50 day MA (currently around 6900) I think nothing to see here.

​Since last night, I have seen around a 2% pullback in my account. To be honest, I'm not overly worried about this; it's part of the game and to be expected as a trend follower. Even if the market continues to fall, I've got my stops set, so I'm not stressed. I know how much I'll lose, and I'm comfortable with that. I also trust the system that I have built and backtested.

I think, to be honest, the motto of a trend follower should always be, expect the unexpected! Essentially trust your system, set your stops and let the system ride out the storm. If the decline continues, expect lots of stories about why it is happening. At the end of the day, this is just noise, often made up to drive readers/viewers/listeners etc.

So, in summary, I don't think there is anything to be worried about just yet. But I'd suggest that you check your stops and be prepared for anything.

Anyway, I hope you've found this helpful.

Happy Trading.

Nick the Trader Guy
May 2021
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