What Does It Really Mean to Trade With the Trend?

Everyone knows that you cannot go against the trend when trading. The main reason is because you are too hasty. Many people sayperiodic resonance, the trend is upward in the big cycle, and the trend is also upward in the small cycle. I feel that I am following the trend. But when this kind of resonance occurs, it is often the end of the trend. The entry point is very poor and a reversal is easy to occur. Even if there is no reversal, the magnitude of the correction is very large, which can easily knock you out. There is also a situation where you enter the market too early. For example, many people here chase after the upward trend as soon as they see it forming. But if you zoom in to see the overall situation, this upward trend is actually a callback in a large downward trend. This is a typical trend of going with the small trend and going against the general trend. Therefore, the safer method is to go with the general trend and go against the small trend. It is commonly known as entering the market on a callback. Those who do trend following usually enter the market immediately after the callback is in place. The stop loss is placed at the previous low. Those who do swing usually wait until the callback ends to find areversal patternTo enter the trade, place your stop loss just below the reversal pattern.

Should the market match the trading system, or should the system match the market? These are two different systems thinking.

The first type of market matching system is mechanical operation and only does the formula specified by the system. Assuming that the rule is to enter the market with a sideways breakthrough in an upward trend, then the order of our analysis is: first, wait for a sideways market to appear in the upward trend, and second, wait for an upward breakthrough to enter the market in a sideways market. In other words, if there is no sideways trading, we will definitely not do it.

The second type is more subjective trading. The trading system is only used as an analytical principle rather than a specific method, such as kinetic energy startup in the direction of the line of least resistance. If you look at this sentence, there is a lot of room for interpretation. The direction of least resistance in the upward trend is upward. Like the first situation, it can also go long when it starts sideways, but when the upward trend is seriously skewed, there will be a climax reversal.

At this time, its direction of least resistance is downward. If there is momentum at this time, it can be shorted according to the system, but it cannot be shorted under the first system thinking, so the second kind of thinking is more flexible, has more trading opportunities, and theoretically has stronger profitability. Of course, it is also more difficult to grasp. Because the rules of the mechanical trading system are clear, execution is easier and the system will be more stable.