THE

NATURE
OFTRENDS
STRATEGIES
ANDCONCEPTS
FOR
SUCCESSFUL
INVESTING
ANDTRADING

#\
&----..-,..

#)
RAYBARROS

NATUREOTTRENDS
THE
STRATEGIES
ANDCONCEPTS
FORSUCCESSFUL
INVESTING
ANDTRADING
The Natureof Trendsby Ray Banos is one of the finest introductionsto trading l've yet encountered.
Clear and concise, Ray lays out the principlesfor assessingand trading markets,emphasizing
congestionranges,trends, and the interplayof these acrosstime frames.Examplesand charts
bring the ideas to life,emphasizingpracticalapplicationof ideas rangingfrom market profileto
wave patterns.This is a book not only to be studied,but savored.

p roresso
cIinicatAssoci ate
r.""^r,5,llti,*3ii3l,?iii3l'5*3;

Author,fhe Psychology
of Tradingand Enhancrng
TraderPerformance
After spendingover a decade in the financialservicesindustry,parlicularlyfocused on technical
analysis,I have seen many traders over-complicatewhat should be a straightforward pursuit.
The Nature of Trends by Ray Barros will bring you back to the most fundamental(and often
forgotten)rulesof trading,which is to identifythe trend and then tradewithinit. I would recommend
that every serioustrader read this book at least once a year as adopting the simple strategies
in this book can help you to flow with the market insteadof fightingagainstit.
MathewVerdouw

,",*!ii27#:::,f;:7:
The Nature of Trendsby Ray Barros is a book for serioustraders.A trader always searchesfor
i n f o r m a t i o n b, u t t h e s e r i o u so n e s s e a r c hf o r i n - d e p t hk n o w l e d g ew h i c h c a n o n l y b e f o u n d i n
Ray's book.
Author,rherradinsEdse:
,o rru#ilff""r1,"|J[n,
"o*
ln The Nature of Trends, the author reveals valuable concepts for profiting from a clearer
understandingof market structureand the probabledurationof tradabletrends.There'sno fluff,
filler,or old rehashedideas in this refreshingvolume on marketdynamics.Noviceand advanced
trader alike will benefitfrom this comprehensiveand enlighteningstudy.
Don Schellenberg
Senior Market Strateg ist
Nextview Pte. Ltd.
. F

ldentifyingand monitoringtrends in the market is a key skill in any successfultradingcampaign

is in-depth analysisand insightsmake lhe Natureof Trendsa must read for those who are
senously.
Geoffrey Sawyer
General Manaqer
CMC Markets Singapore Pte. Ltd.

John Wiley & Sons

llil[illJllll[[l]l

124

The Natureof Trends

Do thc irlcas ancl tools r,r,orkin thc rcal-lvorlcl? This \\'.rs thc (lucstion Iasked
rlysclf n,hen a stuclerrt arrd I rt'centlv engagecl in an experir-trenttcl see rvhether
nry nleth()ds woulcl work ir.r.l slrort-ternr sittr.rtiorr.We ;ri'rrticil-ratcrl
in thc Daniels
'l-rarling
FX I:ttltrrcsMilliott L)olltr'l'rntlitru Cotrrpctitiorithat began in lunc. 2007.
I t ' s i m p o r t . r n t t h a t y o u u n r l c r s t r r r r c tl l r a t t r a c l i n g i n a c o n r p c t i t i o n i s r e r v
tlil'fcrent tlran tracling fol long-ternr profit and long-term consistencv. For this
r('as()n,I ran the stratt'gy trncl nry student, Arrna Wang, cxecutcd it: I detcrnrined
t l r t ' t r e n t i a n c l p o s i t i o n s i z c , A n n a i c l c n t i f i e c tl h c z o n e , c n t r y , a n r l c x i t s t r a t c g i c s .
T h e r l a v l r e f o r t ' t h c l . r s t r l . r l , ' o f t r a c l i n g ,\ \ / ( ' \ \ ' e r e r u n r r i n g i n i i r s t ; r l a c e n ' i t h
7-l -10 sc'c'liigure (r.(r

M i l l i o nD o l l a rT r a d i n gC o m p e t i t i o nUpdateda$ of July 27tlr

i i k a m i n o c k i @ d a n i c l s t r a d i n g . c o n3r1>J u l y 2 0 0 72 ' l : 3 9
J a r r r c sA . K a m i n c c k <
l r r [ , rf d r s r : [ i s e dR a L p r i n t s . ] k a r r , i l r e a I r e d r ] l i l r ldsCt fi l r rcl , . ; r '-r r

M i l l i o nD o l l a rT r a d i n gC o m p e t i t i o n
- ,

. . , 1 ,i ;

r r : r r .

i ,

: ' i i l

lamcs

A. Krmincrki

FIGURE
6.6 DanielsInterimTradinqResult
Tl-rclast clay of tlre competitiolr prodr.rcr:cla small range day, which dicl not suit
any long-tcrm positions. I looket] for a clay-trade that might assist but I could not
return
see anvihing to help otrr positior.r.We enclerl the competition n,ith 75.2c)')i,
on capital see Figurc 6.7. Thc r'r,innerrvars.rlrle to overhaul us on the last cla_v.
The intere.sting thing is that we achicved tire 75'X, result with a nr.rximum
initial ex1-rosureof l5'X,.The broker in chargc of the competitiolr told my partner:
"No mattcr u.ho finished rvith a higher percentage on the d.-rteof Julv 31st,vou

ffectiveMoney Managementand WinningPsychology

125

FXFuture$.c0m
COHGRATULATES
OURFIRSTOUALIFYIHG
R O U N IW
T tNl'tER...

IT WAS AN EXCITINGPHOTOFI}IISHAt{O WE'LL BE AWARDII{G

R.T.
THE $25,OOO
CASHPRIZEDURING
THE WEEKOF AUGUST
6TH.

FIGUBE
FinalTrading
6.7 Daniels
Result
Source:Graphics
usedwithpermission
fromDaniels
Trading.
nd Ray set the standard for everyone to follow." flames Kaminecki in an email
r Anna Wang on 4ug.4,2007)
Still, it's important to realize that we were lucky. To uncierstandwhy, I need to
rovide a little background: I had chosenthe ADUS as the instrument to trade for
recompetition.This is becauseits volatility suited our capital baseand it offered
reprospectof a strong directional move in the two months of the competition.
,ur capital base was large enorrgh to proside adeqrra\epro\ection ag,a\nstrisk ol
lln.

But in addition to sticking to our internal exposure limit we facec'lanother

isadvantagein the competition. When trading againstsmaller bases-we neecled
) generategreater profit to bring about the same return on investment. Technical
rnditions showed the ADUS was preparing for a strong run. It was basing
:ound0.8400and I believed that if the ADUS could break out, either up or down,
temarketswould go for a run. The upside target was 0.8800,a possible400point
rofit,and the downside target was 0.7990,about a 400 point profit. For reasonsI
'on't go into here, I favored the upside.