Well so much for the coin flip analogy.
So prediction/anticipation is not what you do when you "exploit" your "edge"?
Why make a trade if you don't anticipate(if not predict) that the price of the position you take will move favorably?
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Does trend following have an edge?
- Thread starter Visaria
- Start date
Well so much for the coin flip analogy.
So prediction/anticipation is not what you do when you "exploit" your "edge"?
Why make a trade if you don't anticipate(if not predict) that the price of the position you take will move favorably?
Quote from Texasdj:
Any tests I have seen show zero trending behavior in stocks. Goodman tests for m dependent time series, serial correlation coefficient are all built to find trends. Run these tests on stocks and no trend exists. Can you name one statistical test showing trending behavior? I'm always open to new insight. Thanks.
It doesn't sound like you are open to new insight at all. Unless someone is maybe a professor somewhere. You sound suspiciously like another poster here who is notoriously close minded.
I'm not sure why anyone would take what a professor says over what they see with their own eyes. Those same professors who thought EMT was gospel a few short years ago. I have personally never met a professor who made a bunch of money in the markets. I am sure they are out there, but there sure don't seem to be a disproportionate number of them.
Maybe you haven't found any trend following systems that work, but don't assume that is true for all of us.
Hmmm. Is Jim Simons an academic? Why do ALL top funds have PhD's on staff? It's impossible to argue with true believers and trading religiosity. I know it stinks to find out that your core market beliefs are wrong but the sooner you realize this the better. Your trend following is only working because you guessed correctly. There is no edge in guessing.
Actually, I prefer to follow what the top hedge funds and traders are doing. Professors merely take the ideas and make them explainable.
Most top traders don't rely in charts or trends to make money. They have edges that work and are able to change to find edges regardless of market conditions. Most people can't or don't want to do this. They prefer to look at pretty charts confirming their biases instead of learning how markets really work. With this said, I am out of here--- I tried, but the majority will never quite get it. That's also a fact of the market. Good luck!!
Actually, I prefer to follow what the top hedge funds and traders are doing. Professors merely take the ideas and make them explainable.
Most top traders don't rely in charts or trends to make money. They have edges that work and are able to change to find edges regardless of market conditions. Most people can't or don't want to do this. They prefer to look at pretty charts confirming their biases instead of learning how markets really work. With this said, I am out of here--- I tried, but the majority will never quite get it. That's also a fact of the market. Good luck!!
Quote from Texasdj:
Any tests I have seen show zero trending behavior in stocks. Goodman tests for m dependent time series, serial correlation coefficient are all built to find trends. Run these tests on stocks and no trend exists. Can you name one statistical test showing trending behavior? I'm always open to new insight. Thanks.
Well well,
Maybe you ought to do the tests by yourself as I suggested..
See attached, auto-correlation as a function of the lag.
Note in particuliar the 25% correlation for a lag of 1.
I used SPX minute data if you want to reproduce it.
Ninna
Attachments
Quote from Texasdj:
Hmmm. Is Jim Simons an academic? Why do ALL top funds have PhD's on staff? It's impossible to argue with true believers and trading religiosity. I know it stinks to find out that your core market beliefs are wrong but the sooner you realize this the better. Your trend following is only working because you guessed correctly. There is no edge in guessing.
Actually, I prefer to follow what the top hedge funds and traders are doing. Professors merely take the ideas and make them explainable.
Most top traders don't rely in charts or trends to make money. They have edges that work and are able to change to find edges regardless of market conditions. Most people can't or don't want to do this. They prefer to look at pretty charts confirming their biases instead of learning how markets really work. With this said, I am out of here--- I tried, but the majority will never quite get it. That's also a fact of the market. Good luck!!
I have mutliple systems that are profitable. One is trend based, two are countertrend based, one is based on market internals, and two are based on... I don't even know how to explain it. Statistics maybe. They aren't chart based at all.
You are welcome to follow the hedge funds into the bankruptcy they are heading towards. I'll stick with my profitable systems. Have fun in class. If you are who I think you are, then this is a hilarious discussion because that person is a giant failure at trading as far as I have been able to tell.
You aren't going to make a ton of money in the market by following what academics preach, unless you make it in fees from OPM. How is that for a core market belief?
For those new traders reading this thread and wondering about trends, DO YOUR OWN TESTING. Don't take what someone says on the internet as gospel, and don't assume that because some professor said there is no such thing as a trend that you can't make money with a trend based system if you do it correctly.
Quote from Visaria:
If so, can you please tell me what it is?
N.B. I'm not saying that you need an edge necessarily to make money...
If one places trend trading in the category of edge trading, then trend trading has an strong edge comparitively speaking.
Commonly, quantifying and qualifying an edge is pertinent for this sort of edge strategy user. This would define what the edge is.
Recently there have been several trend oriented threads that have had a poor quality of commentary. This is another such thread. I commented in one of them briefly. There, I recommended making a time line of the contributors to trend development. I suggested noting: who , what, why, basis, how, and the dates.
Ostgaaard covered the times from 1790 to 1957. I began to trade in 1957 so I have personally covered the times from then to now with an orientation of trend monitoring, analysis, decision making and taking timely action.
There are many people here who ask questions and they are unable to process the answers given to them, personally. Granted some answers are incorrect and most are very incomplete.
My contributions are in the form of a giant filter which minimizes my contact with those whose do not qualify for support.
The 29 people who contributed the more than 150 pieces of trend information in Ostgaard's article, where not the only ones. Two unmentioned are the major source of my trend MADA orientation. Dodd and Granville. I began with 72 of these pieces in 1957.
The Sharpe Ratio for trading stocks using trend MADA is over 60 on an annualizede basis. This means to the alert reader that he is reading a post that no one else would be able to make using trend considerations.
Here are the myths to dispose of as quickly as you are able.
1. Trend following in Conventional Wisdom is reactive and predictive in nature and does not work in terms of having a statisitically significant edge. Look at the returns of trend following. 20% to 50% a year is commonly touted by those who do not know how to deal with trends. Compare this result to the annualized market's offer to determine the paucity of accepted performance and effectiveness and efficiency.
2. Read the Wikipedia commentary on trends. At best it is a lagging mathematical dissertation only related to one lagging variable of the market.
Most traders are seriously impaired and cannot do a workaround on their short comings. Gallup determined (in their 30 year long systematic study of excellence) that three earth shattering repairs need to be made for most anyone to have the opportunity to do what you do best everyday?
How does a person either begin with trend MADA or convert from trend following to having the opportunity to do what they do best every day?
In 1790, David Ricardo suggested: cut losses and let your profits run. Gallup suggests: forget trying to repair your weaknesses but instead build on your strengths.
Taking timely action is preceded by making good decisions. Making good decisions is preceded by excellence in monitoring and analysis. There is NO FOLLOWING involved. There is NO COIN FLIPPING mentality involved.
How in the early 1800's did the Rothchilds determine to "hold positions in the direction of the fundamentals"? Here fundamentals refers to market direction.
Edwards and Magee, in 1948, and on page 7 of their fourth edition boiled down trend monitoring and analysis to a few words they paraphrased from Dodd and Granville.
Why people do not "get it" is abundantly clear. It will always be this way. People chose to deny to have the oppportunity to do waht they do best every day simply because they make the wrong choices and permanently eliminate the opportunity.
Make it a point to dump trend following and substitute trend monitoring and analysis.
Make it a point to dump one dimensional analysis of markets (See Wikipedia's one dimensional approach) and to adopt the two dimensions that Dodd and Granville brought to the table.
Make it a point to drop statisitical analysis (SEE GS's failure trend work) and switch to non probabilitistic work in trend monitoring and analysis.
Where you wind up is where trading began in the late 1700's and early 1800's.
The essence of monitoring and analysis is that trends are always present and there is no noise nor anomalies. Analysis shows that all markets behave similarly on all fractals and that the fractals are interlocking. Most fortunately, volume leads price.
Trading becomes optimized as the trades approach the market's offer on an integrated set of three fractals. The effectiveness and efficiency of this is shown best by examining the p,v relationship particularly in the region of trend overlap, the region where one trend ends and another begins. A series of five descrete events occurs during this period and they are in a specific order, always.
As you read any post look for the poster's strengths (use the 34 categories Gallup uses). Also determine just how the person is NOT working on repairing his weaknesses.
Here is an example: Covel thinks what I write is gibberish; where did he get off on the wrong foot and why is it a permanent affliction for him?
Quote from Texasdj:
. . . It's impossible to argue with true believers and trading religiosity. I know it stinks to find out that your core market beliefs are wrong but the sooner you realize this the better. Your trend following is only working because you guessed correctly. There is no edge in guessing.
Actually, I prefer to follow what the top hedge funds and traders are doing. Professors merely take the ideas and make them explainable.
Most top traders don't rely in charts or trends to make money. They have edges that work and are able to change to find edges regardless of market conditions. Most people can't or don't want to do this. They prefer to look at pretty charts confirming their biases instead of learning how markets really work. With this said, I am out of here--- I tried, but the majority will never quite get it. That's also a fact of the market. Good luck!!
Paul Rotter is an extremely successful trend trader and is profitable every year. I guess he simply has an uncanny ability to be consistently and constantly profitable . . . right? No way could he have a method that far exceeds you knowledge base . . . right?
Quote from ProfLogic:
Paul Rotter is an extremely successful trend trader and is profitable every year. I guess he simply has an uncanny ability to be consistently and constantly profitable . . . right? No way could he have a method that far exceeds you knowledge base . . . right?
What? Paul Rotter the flipper is NOT a trend trader by any definition of the word. However reading your posts makes it clear that you enjoy making up your own definition of words. Maybe that's the case here? One tick trends?
I'm not dining here. Time to get back to work. Good luck!
Quote from Visaria:
If so, can you please tell me what it is?
N.B. I'm not saying that you need an edge necessarily to make money...
Yes. The HERD migration.
Trend followers differ from gynecologists and pizza delivery boys in that the latter two can smell it but they can't eat or ride it.