Today's Quote: “Our strength grows out of our weakness." Ralph Waldo Emerson.

It is one of the most common expressions in trading. ‘The trend is your friend’. However, unlike most sayings, this one is really true. It is likely that more money is lost by traders trying to short a strong stock or to buy a weak stock than any other way. The basis that forms most of your strategies should be to play in the direction of the trend. It is one of only two times we have an ‘edge’ in the market.

There are some strategies we teach that can capitalize on moves against the trend. However, they are the exception and are harder to trade. There are 2 ways you may be trying to play against the trend. You are either trying to capture the ‘retracement’, or the smaller move against the trend. This by definition is the smaller move, and therefore harder to capture. Second, you may be trying to predict the ‘turn’ in the stock. While stocks do turn, trying to pick the moment in time that they do turn is very against the odds unless you have much information to go on. Even if you get one of these correct, it is often harder to stay with the trade. The move against the trend is not typically as smooth as the move with the trend. For example, in a nice downtrending market, stocks will usually fall on down days very smooth and rapid, once you have identified the moment to enter. During the ‘retracement’ rallies, they are often very whippy, and very difficult to stay with unless you have a wide stop. The decisiveness is usually clear with the trend, often very whippy against the trend. Being aware of this can help you determine what days are best to play and which days are best to relax.