Peter Brandt's Approach to Trend Following and Market Structure

Peter Brandt defines himself as a trend follower. He seeks to capitalize on sustained price movements. He identifies market structure to validate trends. His approach combines classical chart patterns with trend analysis. He avoids counter-trend trading. He believes fighting the trend is unprofitable.

Identifying Market Trends

Brandt defines an uptrend as a series of higher highs and higher lows. A downtrend consists of lower highs and lower lows. He uses simple price action to identify these structures. He does not rely on moving averages for trend identification. He views price action as the purest form of market information. He looks for clear, unambiguous trends. Ambiguous market conditions lead to no-trade decisions. He prefers long-term trends for higher probability trades. He trades across various timeframes but prefers daily and weekly charts for trend confirmation.

Trend Confirmation and Pullback Entries

Brandt confirms a trend's validity through volume and momentum. A strong uptrend sees increasing volume on rallies and decreasing volume on pullbacks. Conversely, a strong downtrend shows increasing volume on declines. He enters trades on pullbacks within an established trend. He waits for the price to retest a previous support or resistance level. For an uptrend, he buys pullbacks to prior resistance-turned-support. For a downtrend, he sells rallies to prior support-turned-resistance. These retests offer lower-risk entry points. He looks for candlestick reversal patterns at these retest levels. A hammer or piercing pattern on a pullback in an uptrend confirms his entry.

Stop-Loss Placement and Trailing Stops

Brandt places his initial stop-loss below the pullback low for a long trade. For a short trade, he places it above the pullback high. This defines his maximum risk. As the trade progresses in his favor, he employs trailing stops. He does not use a fixed percentage trailing stop. Instead, he trails his stop based on market structure. He moves his stop below subsequent higher lows in an uptrend. In a downtrend, he moves his stop above subsequent lower highs. This allows him to capture larger portions of the trend. He avoids prematurely exiting profitable trades. He only exits when the market structure breaks.

Position Sizing and Capital Allocation

Brandt's position sizing remains consistent with his risk management. He risks 0.5% to 1.5% of his capital per trade. He calculates the number of units to trade based on this fixed dollar risk and his stop-loss distance. He understands that even strong trends can reverse. His capital allocation reflects this reality. He avoids concentrating too much capital in one market. He diversifies across different asset classes. This diversification reduces overall portfolio risk. He maintains sufficient liquidity to capitalize on new opportunities.

Discipline and Psychological Edge

Brandt emphasizes disciplined execution. He follows his trading plan rigorously. He avoids emotional decisions. He recognizes fear and greed as trading enemies. He maintains a clear mind during market volatility. He separates his emotions from his trading capital. He believes a psychological edge is as important as technical analysis. He learns from his past mistakes. He keeps a detailed trading journal. This journal helps him identify psychological biases. He understands that consistency comes from discipline, not luck. He focuses on the process, not individual trade outcomes. He believes long-term success stems from a robust methodology and unwavering discipline.