Go with the flow, right?

So system trading is a sham, brokers can't be trusted, stop-loss orders don't stop losses, and gaps don't always get filled. Is nothing sacred?*

Well, when all else has failed and you are watching your life savings efficiently funnel themselves into other peoples' pockets on your state-of-the-art trading software, your broker will often pull out another hoary old adage : "Go with the flow". "You keep fighting the market", he tells you with all the tenderness and concern of a leech on a pig's haunch, "you're only playing it one way - you should go with the flow..."

Brokers like this expression so much they've invented another one that means the same thing : "The trend is your friend". Why are brokers so fond of mouthing these two aphorisms? Because...

1  It makes them sound smart.
2  They like simple rhymes because they have low IQ's.
3  It encourages you to trade more frequently, because it requires you to go both long and short, as the market mood changes. This is good for them, but bad for you because you simply eat up your capital in commissions.

Think about it : what exactly is the "flow" or the "trend"? The truth is it's an ever-changing ebb and flow of sentiment that, like the sea, can change direction at any time.

More importantly : the graph-line on a 5-minute chart may well be apparently heading upwards while the same market on a 60-minute chart is heading downwards, and then again on a daily chart it's heading upwards, but hey! - look at that strong down-trend on the monthly chart...

In short : one man's up-trend is another man's down-trend, and both can change direction at any time.  Sorry.

 

* Actually yes, it's on Page 1.

 

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