For as long as there have been organized markets, traders have been seeking the perfect mechanical trading rule. Virtually all mechanical rules attempt to go with the price trend. They arrive at their decisions based solely on the basis of market action, with no consideration of those factors that cause or influence prices.


Because of this, mechanical trading rules, or automatic trading systems, must be classified as a part of the technical or price movement analysis to price forecasting. The result is to reduce the trading rules to a precise formula or trading strategy, based of course, on sound trading principles.


These sound trading tactics are based on the assumption of never attempting to anticipate in an up market, the point at which prices will stop going up, or to put the trader long or short against the prevailing price trend. In other words, a long position is never taken until after a low has been established and prices have moved up from that low. Contrarily, a short position is never taken until after a high has been established and prices have moved down from that high.


The theory of trend trading is that prices, most of the time, tend to move up and down to the extent that profits can be made from selecting certain profit targets. There can be little doubt that this is a sound approach, and this is the approach this system is taking.



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