Tonight I wanna show you my trend follower applyed to the PSI20(weekly).
Recall my last post about the PSI20 when the follower was throwing a buy signal (http://mytrendfollower.blogspot.com/2010/01/psi20-weeklydaily.html). I wrote this:
"I'm showing you this right now because last week the MTF provided a new buy signal. However, from a technical standpoint I don't think things are already settled. An this is mainly because the MACD divergence is still negative (but growing) and the stochastic oscillator ended this week in a sell. A conservative investor should hold some more time to buy."
This week ended proving me right. Although the follower throwed a buy signal, it ended this week throwing a sell signal! This trend follower is very nice in a way that provides traders some "intrinsic stop loss" mechanism.
More important than knowing when to buy, a trader must know better when to cut the losses. Before entering any trade one must be prepared to accept some maximum level of loss and follow religiously that level
in case the price goes under it.
Trade safely....always!
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