In Trend Qualification and Trading, market technician L.A. Little explains how to identify and qualify these trends to determine the likelihood that they will continue and produce better trading results. By combining price, volume, different timeframes, and the relationship between the general market, sectors, and individual stocks, Little shows how to measure the strength of stock trends. Most importantly, he demonstrates how to determine if a trend has what it takes to develop into a major move with greater profit potential or if it is basically a false signal.
The essence of all successful investing and trading is trend following. Trend following is not just a style or an approach to the market; it is the heart and soul of all profits. There is no way to escape the fact that you must embrace an uptrend of some sort if you hope to eventually recognize a gain. Even the most long-term dedicated value investors, who focuses on fundamentals and buys out of favor stocks, needs to have his or her insight eventually validated by a positive trend. At the other extreme, the aggressive day trader needs a trend of some sort even if lasts for just for a few minutes. Market success and trend following are inescapably connected.
Despite the essential nature of trend following to the investment process, the literature on the topic is woefully lacking. Platitudes such as “the trend is your friend,” “buy low, sell high,” and “cut losers and let winners run” constitute much of the discussion about riding a trend. In many ways trend following is like the famous dicta uttered by Supreme Court Justice Potter Stewart in regards to pornography: “I know it when I see it.” Trends are always easy to see in retrospect. They are almost always painfully obvious when we look at charts, but defining them and exploiting them for profit is a daunting task.
Many market players, including me, like to think that our success in identifying and riding trends is some intuitive skill that is akin to artistic talent. We like to believe that trend trading is an art form that can’t be easily taught or communicated. L.A. Little crushes that conceit with his systematic approach to trend trading. He uncovers and dissects the many nuances and subtle issues that make trend trading so powerful.
Trend trading isn’t just about holding a stock through a series of higher highs and higher lows. That is the easy part. Anyone can hold a stock that goes up endlessly, but, unfortunately, that doesn’t happen that much in the real world. We have news events, shifting sentiments, and a host of factors that toss stocks around at random. Only the best stocks will continue to exhibit relative strength and reward us if we stick with them. Knowing when to hold and when to abandon ship is what this book addresses like no other that I have ever read.
The easiest part of the investment or trading process is the buy point. It is not that hard to find a stock that has a positive technical pattern. The hard part is the sell decision and that is what L.A. Little addresses with great precision. He integrates the concepts of volume, swing points, and anchor bars into the analysis, which greatly aids in determining the health of a trend.
- Redefining Trend
- Classical Trend Model
- Neoclassical Trend Model
- Determining Trends
- Qualifying Trends
- Preparing to Trade
- Entering and Exiting Trades
- Reversals and Price Projections
- Time Frames
- Markets, Sectors, and the Trading Cube
- Trading Qualified Trends
Trend Qualification and Trading: Techniques To Identify the Best Trends to Trade By L. A. Little pdf