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"Trend-based trading" — Michael Covel's strategy tested against crises and trends 🕯
The book reveals the trend-following method as a reliable strategy. You must respond to movements with composure.
4 important lessons from the book:
⏺ Backtesting is mandatory. The trading system must be tested on historical data. Evaluated metrics: average profit, average loss, maximum drawdown, largest win, and risk/reward ratio.
⏺ Position size – based on volatility. The following formula is used:
N = risk / (ATR × price per point).
This protects the deposit from sharp movements.
⏺ Entry rules must be clear. Simple signal: breaking the maximum value within the last N days.
For example: if the price exceeds the maximum of the last 20 days – buy, if it drops below the minimum – sell. No "gut feeling" allowed 😮
⏺ Always set a stop-loss.
The entry price is determined by a percentage (e.g., 2%) or volatility (e.g., 2ATR)
is based on.
📌 You cannot control the market. You can only control how you respond to it.
