Wednesday, October 26, 2016

The Trend Following Astronaut




Of all the technical systems I've encountered, Trend Following [TF] has been the easiest to learn and master. Why? Because unlike other trading setups that require multiple indicators or tools, TF only require that you follow the lines. In the ZFT system we follow only 3 lines : The 20, 50, and 100 Moving Averages.

I'm not claiming that other combinations of moving averages are inferior to ours, but most variations we've tried are just too fast or too slow in reaction time when used in different time frames here in the PH market. The 20-50-100 combination has been our most balanced one. 

Not many understand the simplicity yet effectiveness of this tool. And I guess it's human nature - To have that unnecessary feeling of putting tremendous effort to something in order to make the victory sweeter.

Because why stick to one if you can have many right?



You Infidel.

But to those who have the right mindset, this tool can do wonders. So what are the essentials of Trend Following? 

Let's start!

Having a Trend Following Template

Not many trend followers have trading templates. And by this, I mean different ways to trade stocks under the TF category - because not all TF stocks are equal.

The primary element in trend following are the key positions of the Moving Averages [MAs]. One must first ask, "Which lines are showing bullishness? And are there any that are bullshitting me?" All other factors for your upcoming trade should revolve here. Should you buy on the ZS and sell on the iZS? How about buying on an established AOTS formation? Would it be wise to set your stop on the 20ma or the 50ma?

For example, if two stocks were in AOTS and assuming that both can handle my intended maximum trade volume, I'd put more volume on the one which has broken a higher level of resistance since that would suggest a stronger trend. ATH over 52-week highs, 52-week highs over 6-month breakouts, so on and so forth.

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Anticipating vs. Reacting

Many traders just love to anticipate movements before they happen. To buy before the breakout and to sell before the breakdown. When a trader works to show off that he bought at the lows and sold at the highs rather than show that he followed his trading plan and system, that's his pride and ego talking. Because who can consistently get it right every single time? 

No one.

And what's the point if all you do is anticipate stock breakouts with your holy grail screeners but don't trade them?



But plainly reacting on movements can be equally deadly. Imagine if you buy every breakout without planning ahead, who knows what could happen if the tide suddenly turned against you? Trust me when I say that you wouldn't want to be over committed on a trade, experience a bull trap and have no cut loss strategy.

And how about not selling at the top?

Below is a snapshot of having all my shares intact at it's peak price.


I sold all of my PRMX at an average of 3.52
Do I feel any regret of having lost those potential profits?

None.

So what if you didn't sell at the highs? Don't punish yourself for not being able to control the uncontrollable. Instead, reward yourself for following your trading plan.

Always remember that there should always be balance in anticipation and reaction.

Anticipation is being prepared of what's about to come, but it is the reaction that makes your dreams come to reality.

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Variable Change

When following trends and you bought a stock at a relatively low price, don't be complacent about your trailing stops. How many times have you had a good position mature into wonderful paper profits only to get eaten a few days later just because you failed to adjust your stops? 

"Okay lang. Mababa naman kuha ko."

Many fall into this pit of carelessness just because they bought at the lows. I cannot stress this enough, always account for variable change.


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Post Selling Evaluation


Have I followed the system? Was my volume allocation correct?
How can I improve in following trends?


These are important questions every trader should ask after completing a [TF] trade. I personally take a one or two day trading-break after selling a big position to make sure no lingering emotions remain. One of the worst things that could happen to a trader is to give back to Ms Market all your hard earned profits because of the Superman Syndrome - thinking you're invincible after having experienced a winning streak or a big win.  

Post trade evaluation and analysis gives you a step back and have a good look at the big picture. It not only helps you see the flaws in your system and how you can improve on your next trade, but also gives you that needed "space" to think and digest what you've learned and become a better trader as far as mindset is concerned.




Tag mo yung BF/GF mo na naging astronaut. 



-FIN


PS. Let me know your thoughts on the comments below.



30 comments:

  1. Nice one boss zee! Thank you sa TF lesson.

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  2. thanx sir Zf �� you make it look so easy 🤓

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  3. Thanks sir zee, what you said about being complacent because you bought at a low and did not adjusr trail stops is so true. Gained another insght from you.

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  4. thanks for another learning method for us newbies .God bless senpai.

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  5. Meron ka po ba sir na maipopost na cutloss/losing trades nyu po if any, para naman na maipakita na kahit ang legendary zf is hindi lahat winning trades. Para maka relate kami na even ang pinka mgaling is mayroon din loss.. anyway thanks po sa blogs, salute!

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  6. boss pag tf ba mas ok mag sell sa eod?para iwas whip?

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  7. salamat sir Zee for reminding again you will always be my mentor kahit sa blog mo lang thank you..

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  8. boss Zee tanong ko lang po. ano ibig sabihin ng T-1 T-2 T-3 na may split? mejo noob lang po. hehe

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  9. Hi Zee! Just wondering what's the next easiest set-up to learn and master after tf?

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  10. Salamat boss Zee :-)
    newbie poh na nag aaral pa lang at gusting matuto mula sa inyo.ang hirap pala at nakakatakot lalo na pag padadala sa emotions.nakakatakot kasi perang pinag iponan ang nakasalalay sa bawat digmaan sa merkado na kakaharapin.sana poh mapabilang ako sa mga estudyante nyo sir.alam ko po hindi ko kayang sumama sa subastahan nyo sir zee kasi maski ang laman ng port ko eh hindi pa nangangalahati sa mga presyo ng subasta.pero sana mabigyan ako ng pagkakataon mapabilang sa inyong tribe at matutu mula sayo sir ZEE.kung nababasa nyo man poh ito sir zee sana maturuan nyo poh ako.
    nagmamahal isang newbie mula sa Mindanao.

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  11. Thank you Sir for sharing your knowledge, medyo madami na akong nabasang blog at ito ang inuulit ulit kung basahin at ZFT way ang pinaka pasok na system para sakin since im an OFW. Nalilito lang ako sa entry if saan maganda pumosition sa pre close or next day sa opening.

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  12. Hi Zee, good morning. I'm starting to learn about adjusting my stops. If I get to reach a certain profit, do you adjust your stops based on certain support or based on percentage?

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  13. Medyo late reply, Thanks Boss. BIG HELP.

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  14. Boss Zee, your application of the Variable Change to trading just convinced me that you're a genius. Parang nadishearten ako ng konti. Haha! E medyo sumakit ulo ko dun sa pagintindi sa Monty Hall Problem. :D Thanks for this, boss! - Dexter H.

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  15. read again for the 3rd time and it makes so much sense now. weee! <3

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  16. Salamat Sir!learned a lot from you..please continue sharing your wisdom and knowledge in stock trading.. God Bless po.

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  17. thanks Lodi, bakit ngayon ka lang (ngayon ko lang makita blogs mo) 😂😂😂😂

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  18. There is no such thing as free lunch as people say,but from what I have read from your posts it's like literally eating free meals and snacks . Thank you Sir for your kindness in sharing such remarkable trade lessons. God bless you.

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  19. good read sir ZF salamaat po sa advice

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  20. my I ask what does '100k pre split means'?

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  21. Nabasa ko kapag nagbuy tranche ka, either 2 to 4 times equally/diff. quantities (50/30/20). Pano sa selling tranches? San ka nagbebenta ng pinakamabigat? Sa example mo sa T3 pinakamabigat.

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  22. sir pwd malaman, yung pinaka matagal na TF nyo? ilang months?

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