An Easy Way to Trade

I am a staunch follower of Trend Trading. I like trend following because it is easy and saves a lot of time. I spend around a couple of hours and I am ready with my strategy for the following day. But it took me almost five years to learn about this strategy and convince myself that this is the best and simple strategy to follow.

When I began commodity trading the books that I read and the information that I could find on the internet all pointed towards understanding the commodity markets, the demand supply conditions, economic changes happening in countries like China and the USA. I was also told, to be a successful trader in commodities, you should specialise in a few of them and try to learn the maximum possible about their production cycle, weather conditions and how it effects their production, and so on. I began to wonder how on earth someone who is supposed to trade can learn about all these things and continuously keep himself updated. While telling about all these things, these books never said anything about when one should buy or sell a commodity, when one should exit a trade once he has executed a trade. I also had this nagging doubt about the extent to which this information was true or dependable. Despite all this I kept reading news about the various commodities their supply and demand, economic growth of the countries, etc. When I began to trade based on this information I found to my surprise that I was not able to make any money from my trades except to pay my broker his fees and incur losses in trade after trade. In fact, I began to realise that when I went short on a commodity based on the news report that there was going to be a fall in prices due to a good harvest and increase in supply, the price of the commodity began to rise after I shorted it. I can only say I was flabbergasted. We know how it feels when we are so confident of our trades, but the market goes against us.

Then I came across technical trading and trend following. Two books influenced me to a very large extent. It was so well written, and trading was so easy according these books. All that one had to do was to follow the price with the help of a candle stick chart and watch the price action. Price action already includes all the news and other development. What with all those expert traders in the market who know about developments in the commodity markets well before the news reaches us. The price can never lie. It always will reflect the true thoughts of the traders. By following the trend what we do is just ride the trend if it exists.

Now the question arises on how one should trade the trend, when should we execute our trade and at what point should we exit. These two books explain in minute details about all that one must know about trend following. The author Michael W Covel has written these two books. If I had only come across these two books five years ago I would have saved a lot of money and energy. Each of these books serves two different type of personalities. For example, in car driving there are two types of drivers: one type is those who are not interested in knowing about the internal workings of a car but would love to drive it, the other type would like to drive it but at the same time is keen to know about the internal workings too.

The Little Book of Trading: Trend Following Strategy for Big Winning is for those who would like to drive a car but are not so keen to its internal workings.

The other book “Trend Following Learn to make millions in up or down markets” is for those who would like to know more about the internal workings of a car while also driving it.

I am commodity and options trader. I have been trading for the last 12 years in the Indian Markets.