Such a simple question, it may sound even stupid. But as so often simple questions don’t have simple answers. For trading the important part is the entry. If the timing for the next trade is right, short time frames are meant here, one of the most valuable weapons the trader has, the stop loss method, can be applied. For trend trading the stop loss is even invaluable. But if the local timing isn’t right, stopping losses can be disastrous.
Entering the market anywhere or on strength that doesn’t mean anything may throw the stop trader off each trade. Then magically or frustratingly the price always comes back and even advances further into the right direction. At least at times it seems to be always.
Buying into the market without “micro-timing” needs a bigger allowance for the price to swing, or to breath like some traders put it. We need a loose stop instead of a tight one. Clearly this idea may prove even worse for the final trading result.
Another idea is to enter the trend as soon as possible. Unfortunately it doesn’t fit good to the notion of trend timing in the sense of getting on it when there is local strength and still local potential. This would be the type of entry a tight stop loss based trading system needs.
But, while there is often one of both, either strength or potential, both together are seldom. Such a trading system would have to wait for the right entry spot. Waiting is detrimental for trend trading. The best trends, seen in hindsight, are missed. Additionally that undermines a traders psychological health. This may lead to procrastination or a complete trading block. Is this entry spot now good enough or should I go on waiting… and watch the price doubling again, without me being in?
Some sort of relaxation could come from preselecting trends with fundamental pressure. Having trust into the investment would allow the use of wider stops. The outcome could be sort of an investor-trader strategy.
Trust could also come from the mythical trading system that just swings or hops from one trend to the other, not using stops in the inner sense. If there is a formula and a computer that does everything for the trader, there are no psychological trading problems anymore. The question is then, will the trading automat be good enough, or will it too often enter trends in the moment they end. Yes, strangely that is what trend traders experience all too often.
The final answer for trend trading could be a combination of all the above. A selection of trading candidates with fundamental potential would increase the probability for real outliers, huge gains, that make trading fun. A looser or wider stop loss limit that could be a trading signal on its own in the other direction to prohibit the opposite, real killer losses. And then the magical swinger autotrading system, hopping from one good trend to the other in the stock markets of this world.
