Day Trading is Not Trend Following

A recent email:

Hi Mr Covel, I am Michael Yang, a Chinese trader, also a reader of your book. May I ask you a question? I have already found a way to identify the trend, and I agree with your method. I always trade by following the trend. These days, I think of different time frame and find two general ways to trade. The first one: I try to identify a long-term trend in a big time-frame, just like day chart or 4-hours chart. Then I try to find any following-trend signal in a smaller time-frame. For example, if I find a down trend in a 4-hours chart, I will ignore all buy signal in any time-frame that shorter than 4-hours. I will follow all sell signal in 1H chart, 15M chart, even 5M chart. By this way, I think I can follow all big trend that identified in 4-hour chart. But, I will miss some big reversal trend. Because any trend change begin from small time-frame, and then big time-frame. The second one: I try to trade in any single time-frame. I will follow all signal in a single time-frame, buy, sell, and buy, sell, and then buy,sell. By this way, I can hold some position that against big trend in big time-frame and make a big stop loss, but I cannot miss some reversal trend. I follow all trend in a single time-frame. What is your opinion on these two ways? Which one do you think is better for traders? Thank you!

I have never met a successful trend following trader trading 1H, 15M or 5M time periods. That’s not trend following. That’s gambling. Feel free to follow-up with any questions.

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You might like my 2017 epic release: Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets (Fifth Edition). Revised and extended with twice as much content. Out April 24th 2017.