Listen Up Trend Followers – It’s All in the Skew
For Price Following Systems that operate off the philosophy of market divergence, your success is attributed to a handful of trades. The edge lies in the ‘Positive Skew’. Keep to the right hand side of the market distribution by letting profits run with a trailing stop and no profit target and make sure the left hand side is managed by cutting losses short.
You cannot predict the ‘when’ of a large outlier…..so don’t bother. You must catch all trends to participate in the occasional unpredictable large outlier. Type 2 errors (missing the big one) is the greatest sin….so avoid retracement entries where you can miss a few and stick to breakouts, where you can catch them all. False breakouts (the whipsaw) is something you just gotta live with.
To achieve this:
You need this:
In other words…..”your success is defined by a handful of large positive outliers”.
Trade well and prosper