SmarTrend Drawdowns

Q: Hi Chip,

New subscriber here. Notice that some trend alerts can keep you in a losing trade for uite some time/and points. Would you suggest doing other work to determine stops as some drawdowns seem they could be very painful.
Also, there is no way one can pull up a weekly/monthly chart--correct ?

Mike

A:Mike,

Thanks for the email.  It is a good observation and it does happen some times.  We discussed this point on this forum in the SmarTrend Overview section in a post called Trend Trading  Systems.  Trend trading requires confirmation of a move up or down before getting a signal.  Some times it is followed by a short reversal but then the trend resumes.  Over time you will see that this actually allows you to be sure you are in the really big, multi-day trend moves.   With trend trading, 60% of your profits come in about 40% of your trades.  A slight variation of the 80/20 rule since you can make a few small 1-3 point trades from time to time.  The key is to never suffer through an irrecoverable drawdown.  I should also point out that trend trade, especially SmarTrend, alerts are ideally for position initiation.  Meaning it is not mandatory to buy on the exact alert date or price.  Especially knowing that there could be slight moves in the other direction in the short term.  So if you get an Uptrend that is near support, sometimes you can set you limit at that support level (e.g., 50-day moving average).  But we would not recommend going long when a stock is in a Downtrend according to our system.  SmarTrend has a fairly good track record on this point.  While some people can get lucky calling a bottom, eventually that luck may run out which is why many traders have time profiting over the long term.  Trend trading, or trading any system, requires some discipline and patience.  We hope SmarTrend can help be your guide.