Over the weekend, I was re-reading the book “The New Market Wizards”, you can download it here.
One of the successful traders, Randy McKay, says this:
“The beginning of a price move is usually hard to trade because you’re not sure whether you’re right about the direction of the trend. The end is hard because people start taking profits and the market gets very choppy. The middle of the move is what I call the easy part.”
This in essence, is trend following – catching the easy part. Trading systems such as Ichimoku Kinko Hyo allow you to do this. Randy adds:
“I never try to buy a bottom or sell a top. Even if you manage to pick the bottom, the market can end up sitting there for years and tying up your capital. You don’t want to have a position before a move has started. You want to wait until the move is already under way before you get into the market.”
The problem of “sitting there for years” is common to fundamental value investors, who pick up stocks which are beaten down by the market. They can end up waiting for years before the market finally realizes the stock is undervalued. Most retail investors do not have such capital and holding power like Warren Buffet does.
Trading Systems such as Ichimoku Kinko Hyo work for Forex and Stocks, and across all timeframes. It allows you to catch the easy part of the move.
