Band Break System Trading

Avoiding losing trades Part 4 - Non-profitable trades

BBS - Intro - Results - Template - Basic - More_money - Selecting_stocks

Avoid losing trades PART1 - PART2 - PART3 - PART4 - Stock_Selection

Most non-profitable trades in a trend following system like BBS, will occur with buying signals appearing during an upward correction in a medium to longer term down or flat trend.

Looking at the daily chart in the following figure there is a BBS buying signal.

Price found support on the 165 day average and support from a previous low. It now breaks above the 100 day average. All indicators are moving up from low levels.

There is apparently no reason why you should not take this trade.

This is typically one of more reasons why you should always have a look at the longer term trend. Opening the same chart on a weekly basis you can see a very large up move for more than 2 years.

If a longer term price reaction is started now, the down move up to now will certainly not be the end of the reaction already. So, you should be aware that an up move now may just be a small correction in the future longer term down move.

You can use my book '"Capturing Profit with Technical Analysis" and use the part about price targets and Elliott wave counts to estimate if price reached a target. That can give you the extra information you need to make a decision.

If for any good reason you entered this trade based on the BBS signal, make sure you get out on the first BBS selling signal. Right away when it becomes clear that a long term down move has started.

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