Carrying on from my post last week about combining fundamental and technical views, I have been thinking about what should count as an argument for trading or not trading. I am still considering adopting the method I suggested in the earlier post of trading every breakout in a trending market until I get into it.

Arguments for trading

  • There is a trend OR a trend is beginning (fundamental or technical argument, or both).
  • AND there is a short-term technical signal.
Arguments for not trading when there is a short-term signal
  • There is no trend.
  • Trend is old OR trend may be turning.
  • Signals do not work in the market concerned.
  • Major resistance (e.g. top of a range) in the way of the profit target.
  • Trade would give too much exposure to a risk factor.
  • Upcoming data risk.
I am planning to make more use of the scanner function in Tradestation. I can now scan for both breakouts and retests of a breakout. When a market comes up on the scanner, there is a presumption in favour of trading it — and only the arguments for not trading listed above count as reasons for not doing so. I will try to state formally, before I enter a trade, the reasons why I think a trend is in place.

Update: I should also ask, explicitly:

  • What would be good news, and what would happen?
  • What would be bad news, and what would happen?
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