Technical Indicators The Trend Is Not Always Your Friend

Technical indicators – Hey traders, if you are new to trading your first introduction into the circle will most likely be influenced by a trend trader. If you are a seasoned trader, how much time do you spend sitting in front of your computer trading on an average day? If it’s more than 60 min. there is a good chance you might be wishing you had more confidence in what you were seeing on your charts.  There is no need to sit there all day staring at your screens, unless, by chance, you’re a trend trader.

If a day trader thinks the trend is their friend, they need to re-think that logic. The trending scenario is present in only  a small portion of the overall picture. This means that the majority of opportunities (80%) are pivot related and possibly right in front of you without you even knowing they are there. With the proper understanding of pivot point technical indicators, this could all change.

Successful trades are largely more available in pivot point trades than they are in trend trades. How can someone trade something that’s hardly ever present? On the other hand if they know what they are looking for, it’s just a matter of taking advantage of the opportunities that are almost always present. The key to success is not how many points an emini futures trader can make, but rather how consistent they can be accumulating those points. Once consistent, the amount of contracts traded is almost irrelevant.  Trend trading doesn’t breed consistency, pivot trading does. Trend trading on the other hand, breeds a divine interest in advanced money management skills, inadvertently out of necessity.

Trend trading can take years of practice, and great money management skills will help postpone the inevitable failure by a number of years, depending on the size of account, and other variables. This could actually be a bad thing, giving the trader a false sense of focus and security. The only money management skill a trader really needs to implement is quite simple. Making more money than they loose. Unfortunately, if that isn’t working, people have a tendency to blame their money management skills rather than their trading ability, thereby  treating the symptom, and not the cause. Money management is not going to help if the trader has a system that doesn’t work. Sadly they usually don’t discover this until it’s too late.

Early on in everyone’s exposure to trading, they have been influenced by a little catch phrase “The Trend Is Your Friend”.  Nothing could be further from the truth in “emini futures day trading”. They might as well recite “EEnie Meenie Miney Moe” and see how far that little nursery rhyme will get them. It’s no wonder why 90% of traders out there are never going to be successful.

Many day traders follow this theoretical path to the “Promised Land” using these road maps to “Nowhere” only to discover that somewhere along the way, years have passed, money has been lost, and they are still wandering around in circles chasing their tails. If trends are present only 20% of the time, that means these trend trading gurus are only selling traders something that works 20% of the time. Hence money management skills are needed to weather through the 80% downtime, or as they call it, draw-down. Playing catch up and replenishing funds when a successful run is finally paying off is usually the case more times than not. Greed then enters the picture as the trader tries to squeeze every last drop out of a run. This desperate defensive need then psychologically places them into a categorical habitual tailspin that becomes very challenging to overcome. The best defense is a good offense. Don’t trade for the money. Try telling this to a trend trader who is most likely trying to replenish his drawn down account looking for those 1 or 2 good days.

These paths or road maps come in all the various shapes, sizes, colors and can be acquired through a multitude of sources. Whether they be in the form of indicators, renko bars, specialized trading software, methodologies, or any combinations thereof, they are still the road to disappointment if they are trend related.

Interesting enough though, they all boast about their ability to help  trade the trend. Through no fault of their own, the founders really aren’t aware of what they are selling doesn’t work. After all, they aren’t really traders, only great marketers. If people believe the trend is their friend, then who are they to argue, and that’s what they’ll be selling. They are more focused on improving and selling something that traders want in the first place. Add some great marketing skills and they’re giving traders exactly what they were looking for. They never mention that the trend is not your friend, but promise to spot that elusive little rascal should he come around.

They can be found in almost any trading forum where they are passed around freely, or traders can spend from a few hundred, to upwards of many, many  thousand of dollars for the full race gold plated versions. Let’s not forget the leased version that traders use as a crutch for eternity. It takes time to learn, so traders justify the monthly payments as the cost of doing business. Be also especially leery with offers of income supplementation through various forms of so called hedge fund investing while learning, or an organization’s empty promises of trading THEIR funds if all goes well. Some actually, even generate their revenue through fees with expected multiple failed attempts to pass their requirements.

Some traders fall into the abyss of pie in the sky trading signal software that promises to give simple trend trading entry/exit signals. If someone should find themselves there, they should run away, run far away. This usually attracts victims that are too lazy or naive to be traders anyway. If the mind can’t see it, a software code sure as heck cant. Unfortunately most traders at this  level of understanding can’t comprehend that yet.

There isn’t a software coded indication for entries or exits that can determine anything as quickly and proficiently as the human mind when it comes to pivot point trading. There are just too many charting variables to consider for algorithmic code strings to work smoothly. Inversely this isn’t even a effort for the properly trained human mind. Lazy traders are always looking for shortcuts…. there aren’t any.  Either the brain knows how to trade or it doesn’t. 

There aren’t any automated software pivot trading signals that are going to compete with the agile minds ability to reason. There aren’t any “successful” automated or semi automated trend trading systems that take the emotion out of trading due to the simple fact that they aren’t consistent. If they aren’t consistent the subconscious mind will never accept them without a good dose of fear as a by-product. So whats left are the easily coded inconsistent trend trading  systems geared for 20% of the overall trading opportunities, if and when, all the market conditions are just right.

Proving to the subconscious mind that a person really knows how to trade will eliminate the fear, anxiety and a need for greed that can destroy a traders account. Simply put, applying mind over matter will keep those demons at bay, once a level of consistency can be established and proven to the traders subconscious mind. Trading should be just like driving a car. Knowing what to do and when to do it automatically, subliminally, & comfortably.

So now they are out a  few dollars, and a few years, only to discover the road map they bought was nothing more than marketing genius rather than the trend trading insight they were hoping for. Then again, maybe they just think that the market is always getting the best of them and in due time they will get better and recoup their losses.

Maybe it’s time to start thinking about changing the direction of their focus from trend to pivot analysis. Sooner might be better than later.

My students are very proficient at pivot point trading, and are usually finished trading 30-60 min. after the market opens. If you would like to see examples of their trades please click here.