Just wanting to get some feedback on something i've been mulling over.
I'm interested in the possibilities of taking mid to long term positions using futures (specifically the mini dow jones) .
One of my concerns though is surrounding stops, and wether to use a tight stop (chosen using risk management) and face getting turfed out regularly, or use a loose stop (chosen using support levels).
I was just wondering if anybody had any experience with this kind of strategy? I'm very green on derivatives, but feel reasonably ok picking macro trends.
I'd be picking markets using a more macro approach, rather than strictly technicals. Although technicals would certainly play a large role in entries and exits.
If this is feasible, I'd build a strict system of rules including down time after getting stopped out etc.
Everything I've read says that diversification is key in trend following systems, and to only trade one instrument at a time is tantamount to signing your own death certificate, yet I can't really see myself holding more than one contract at a time. Perhaps 2 at an absolute stretch. Is this still feasible? If the trend goes against me, I get stopped out. If not, onwards and upwards. I guess the key is positioning stops so that I don't suffer unnecessary losses, but how to balance that against not getting turfed out on a reaction?
Obviously I've got an awful lot of learning before I even consider committing money to the idea.