Trading is easy. If one has lots of time and money. But sadly most people don’t have one or both ingredients in great quantities.
We need to work, we drive around, buy stuff and spend our time with lawn mowing, fixing things or we are forced to do paper work.
Life is what happens while you make other plans and in no time a day, a week or a month has passed and we have not made a single inch of progress.
Therefore a trend is the perfect entry for my automated system. If the market moves upward within 10080 minutes (equals a week) that is a buy signal. If it moves down it is a sell signal.
That can be calculated with a simple moving average called an IMA. And most often you can also see it. You see it on all the charts for the shorter time units. And that exactly is the reason why I like the long-term trend based entry so much.
So what needs to be true when it goes up for a week? Can there be an opposite trend in a smaller time frame? Yes.
But can it go down for a whole week in that smaller time frame when it goes up for my 10080 minute trend? No.
So what does that mean? See, everybody has his own perceptions how the market works, but I think most discretionary traders and also most systems recognize long-term trends.
And not only I trade trends. Indeed a trend is what most entry signals are based on. Those signals often only try to refine the entry time.
Trends do rule our whole life. People that buy garden furniture in October and heating oil in June know, that anticyclical purchases can save money if you buy when other folks don’t buy.
That works well for one time purchases, but if we need stuff like groceries on a consistant basis the advantage will be replaced by an average price.
Let’s assume the gasoline price would be a kind of trend. It went down for the last few months, but some day the price rises again.
If one is clever, it might be possible to save money on a monday at the gas station. But he will never make it with a tankful long enough to avoid rising prises in the long term.
And who knows if he has saved money in the long run if he has to refuel 10 days later at the worst time, exactly before the price is going to drop again? Maybe at the expensive highway gas station?
A market advantage is always a good thing and I would agree with every trader using it. For me the biggest advantage of a trend is the fact that one can see it on all the smaller time frames. How many people and systems this might influence?
And when a trend is nessecary for me to make profits at all, why shouldn’t I consider it to be my entry signal?