My First Month Fading 20 Day Trends
Today was exactly thirty days since I started trading 20 day or 1 month trend fades. I learned about this strategy online at a trading site and I really like this strategy. I think the reason why I like it is because I get to trade against the trend which feels really natural for me to do most of the time. Here are some of the things I learned after my first 30 days of trading this strategy. My even shared the rules with my online futures broker and he thinks it’s pretty nice strategy for short term swings.
Don’t Trade During Quiet Periods
One thing I really learned the hard way was to avoid trading on Friday’s and days when there’s nothing going on. It seems after much testing that this method really thrives on volatility and liquidity and if there’s none around I just stay away from the market.
Another important fact I learned was to avoid entering orders too late in the trading day. Anytime before lunch time in Eastern time zone is acceptable but anything beyond that or after lunch begun is just trading too late in the day.
Trade Very Liquid Markets
One of the firs things I learned when I first begun trading was to use simple indicators and trade liquid market. The problem with most commodity and futures markets is the fact that they are cyclical. What I mean is they go through periods of high liquidity and volatility and periods of low liquidity and volatility. So when I say tell you to select a liquid market I’m referring to how the market is doing when you are trading it. For example, orange juice and lumber are not liquid markets. However, during January hurricane season the liquidity and volatility in these two markets picks up. So always look at what the market is doing now instead of historically.
Be Loyal to Your Strategy
When ever I would start trading a new strategy and things didn’t go my way I would quickly abandon it for something else. I learned over the years that all strategies regardless of their effectiveness go through periods of winning and losing and it’s just part of the game.
So don’t be to fast to judge your trading strategy and back test it to see how effective it really is in the long run and not just over a period of a few weeks. Most great futures strategies go through losing streaks, this is called drawdown’s. This is a period when traders are not making money and are losing instead.
Everyone goes through a draw down and the key is not to panic while you are in one. Everyone usually gets out as long as you don’t risk too much on each individual trade.
If you get a chance check out this article about Discount Futures brokers at one of my favorite sites.