TREND FOLLOWING

I want to take some time and remind readers what trend following is all about. We are hearing a lot of opinions lately about the market whether it is on CNBC or on financial websites. There are a lot of smart successful commentators saying that the market will continue to go up...and there a a lot of smart successful commentators saying that the market will go down. This can be very confusing for the experienced trader let alone the novice trader that's just starting out. The great thing about trend following is that we don't care about the predictions...we only care about the trend. If you have been in one of my classes, you have heard me say that the "price is always right". Now my name isn't Bob Barker and I don't run a game show...but I do understand a thing or two about trends. Right now the trend is up (even after today's sell off). I don't care what people are saying...bullish or bearish...that is the current trend. That is what the price is telling us. We are all fearful that the market will open one day and wipe out our profits, but this should not keep us from missing out on the potential profits we could accumulate if the market keeps going up. In other words, we might miss out on making $5,000 because we are afraid of losing $500. As a trend trader, we know that we will lose money when the trend finally changes direction. That is inevitable. We also know that once the trend changes direction, we will change direction and begin to make that money back on the reversal of the trend. So how to we deal with a market like this one? I would suggest creating a plan...that's always the best start, right? Your plans should all be different in some way. In other words, your plans should match your trading personality. Maybe you have made 50% on your money during the last two months and you would rather just get out and wait to see if we get a big pull back before getting back in. Maybe you use a shorter term moving average to possibly see the early stages of a trend reversal...this could include moving average crossovers. Maybe you diversify your trades into different sectors. Maybe you make it a point to have some Call options on some bullish trends and some Put options on some bearish trends. I can't tell you what the perfect plan is because there isn't a perfect plan. What I can say is spend your time on your plan and less time on listening to others' opinions...and that could include me at times. Trust the trend. Trust the characteristics of the trend. You could lighten up on your risk, but keep trading this trend until it changes. For nice bullish patterns look at STAR, RVBD, HMY, and VCLK. I still really like BBY, DRI, KSS, and especially AMZN (look at that nice ABC pattern). For sectors, keep an eye on technology...specifically chip stocks. They have pulled back recently and they are either going to continue their uptrend...or break that uptrend. I like these areas on the chart because either I capture the whole next move up...or I lose a small amount if the trend is broken. I like that reward to risk. You could also use the Market Trend Signal (www.orbisadvisors.com) and wait for a "buy" signal. I would even suggest you keep looking at AAPL until it finally reverses its trend. This recent pullback could provide a nice opportunity. Watch financials. They pulled back today on light volume. Most had big "up" volume on Friday. Stay with GS, MS, JPM, BAC, AXP, and WFC...or play all of them with the FAS or XLF. Avoid COF...it had huge selling volume today. I still like the energy sector...but more specifically natural gas. Look at APA, CHK, and NGS to possibly make big moves (APA has already moved very nicely)...or you could play all of them with the UNG. This could all change if the economic outlook changes...but for now we will trust the trend.