[9-Ji Soku Daytorē | FX no Kotae de tadori-tsuita 10-nenkan no Kento de] Why do I lose immediately even though I bought on a trend-following trade?

Good morning. It’s An-chan.

When you start FX, you’ll hear the phrase “don’t go against the trend” quite early.

If the price is in an uptrend, buy.
If the price is in a downtrend, sell.

That’s what we call “following the trend.”

I also think the idea itself isn’t wrong.

However, when you actually trade, something strange happens.

It’s clearly rising.

So I bought.

Yet, it starts to fall right after I buy.

When I look at the stop-loss, it rises again afterward.

“The direction was correct, so why did I lose?”

I’ve experienced this many times.

And after continuing to test, I realized there is a big pitfall in following the trend.

“Just because it’s going up, doesn’t mean following the trend will work”

For example, imagine a chart where the price is rising sharply.

Anyone can see it’s rising.

There,

“It’s an uptrend, so it’s a buy,”

and you decide.

But what if that point is already after a big rise?

The market doesn’t move in a straight line.

Even while rising, it will drop midway.

And then it rises again.

Even if the overall trend is upward, there are many drops along the way.

In other words,

Buying in an uptrend does not mean it will go up immediately after you buy.

This was where I first stumbled.

Even with the direction correct, you can lose

For a long time,

“If you can correctly judge the market’s direction, you’ll win.”

I believed that.

But when I actually checked the charts, it wasn’t so.

For example, suppose there’s a market that rose from 100 to 110 yen.

Looking back at the chart later,

you can easily say, “This was an uptrend.”

But in the middle it may have moved like

100 yen→104 yen→102 yen→107 yen→105 yen→110 yen

rising and falling repeatedly.

From 100 to 110 yen moving in a large directionis upwardthough.

Even if someone bought at 104 yen and stopped out at 102 yen later, that trade is a loss.

It doesn’t matter if it rises to 110 yen afterward.

In other words,

Predicting the market direction and making a profit in that trade are not the same thing.

As I continued to test, I became strongly aware of this difference.

What I started to focus on was not only the direction but the “position,” too

So, what is needed?

What became important was

not only “which way it’s moving now,” but also “where in the flow you are.”

Is it already at a high point?

Is it at a slight pullback?

Is there a movement ready to rise again?

Even within the same uptrend, the conditions differ completely depending on where you buy.

The same is true for downtrends.

Just because it’s going down doesn’t mean you can sell from anywhere.

That’s why I began to think that

“Uptrend = buy, downtrend = sell” alone is not sufficient as actual entry conditions

to me.

Following the trend wasn’t about chasing the direction

Here, the meaning of “following the trend” inside me changed.

Previously,

You buy because it’s going up.
You sell because it’s going down.

That’s what I thought was following the trend.

But if you do so, you may catch a high or sell at a low.

What’s important isn’t simply following the price movements.

Enter in the same direction as the larger flow, from a place where the conditions are right.

This is the approach to trend-following I arrived at after ten years of testing.

Of course, the next issue is how to determine “where the conditions are right.”

If you judge this only by instinct,

you’ll think, “This time it’ll go up more.”

“This time it’ll go down more.”

and you’ll slip back into discretion.

So I continued to test that judgment as well.

Losing with trend-following isn’t a contradiction

“I lost even though I wasn’t going against the trend.”

In the past, I found that strange.

But now it’s different.

There are declines in the middle of an uptrend.

There are rises in the middle of a downtrend.

So, even if the direction is correct, you can lose depending on where you enter.

This doesn’t mean trend-following is wrong.

The problem was that I was entering by only looking at the direction.

And as I continued to test this issue, I realized something even more important.

Not only direction and position, but even that isn’t enough.

The result changes depending on when you enter, even at the same place.

This made timing of entry important.

This connects to my previous article “What’s really important is the timing of entry.”

Trend-following isn’t simply buying an upward-moving market.

Confirm the flow and wait for the right place and timing within that flow.

For me, trend-following evolved into that mindset through ten years of testing.

End

Well then, everyone, farewell