If you'd like to cut/paste your "mathematical" proof, ^C/^V should work (or -- maybe the proof is superdoublesecret?).
Does trend following have an edge?
- Thread starter Visaria
- Start date
If you'd like to cut/paste your "mathematical" proof, ^C/^V should work (or -- maybe the proof is superdoublesecret?).
Quote from Texasdj:
No, therein lies the issue. first, if it can proven that trends don't exist in the stock market, what exactly are you trading?
Furthermore, to other posters who mentioned the herd, sentiment and crowd psychology as to why "trend following" works--- your entire premise is faulty--- as is behavioral finance imho.
It is not the herd, crowd, or group of participants that move the markets--- it is the density of money ( for lack of a better term )
for example, the crowd may be 1000 strong, but one, solitary trader can control more capital than all 1000 of the crowd--therefore it matters not what the crowd or group does as its the money that moves the market regardless of how many or few control it---
I just destroyed the entire premise of TA, trends, charts and behavioral finance---- book coming soon....
You are terribly wrong.
Your (very bad) example might apply under very strict conditions to extremely illiquid markets.
In the bigger picture, markets involve so many participants with so many conflictual interests that their behaviour pretty much sums up to randomness.
Which is a great news for us traders, since it allows us to leech some $ out of the market.
I would (again) advise you to test it by yourself but since testing for autocorrelation was already too much to ask for I doubt you'll be able to figure out this one. Please prove me wrong..
Ninna
Quote from Texasdj:
No, therein lies the issue. first, if it can proven that trends don't exist in the stock market, what exactly are you trading?
Furthermore, to other posters who mentioned the herd, sentiment and crowd psychology as to why "trend following" works--- your entire premise is faulty--- as is behavioral finance imho.
It is not the herd, crowd, or group of participants that move the markets--- it is the density of money ( for lack of a better term )
for example, the crowd may be 1000 strong, but one, solitary trader can control more capital than all 1000 of the crowd--therefore it matters not what the crowd or group does as its the money that moves the market regardless of how many or few control it---
I just destroyed the entire premise of TA, trends, charts and behavioral finance---- book coming soon....
Surf, please try to use consistent English when posting.
Each time you post under a new, soon to be banned alias, your credibility is what you further destroy.
The only thing you have proven is that you are thick . . . no book necessary to validate that.
Intradaybill's Q's and their subissues can all be dealt with mathematically.
Once a person loses his requirement to deal in probabilities, the maths solutions are more and more self evident.
The mathematics involved is not college level mathematics which means most traders can deal with the maths.
In this thread some people are suggesting that others cannot grasp the math or reasoning required to gain a successful approach.
Intradaybill is enabling readers to focus on the opportunity and to figure out how and why to take advantage.
Correctly, he introduces how filtering works to get to the nub of the opportunity.
Easy examples to understand are how to position trade stocks or trade the ES intraday. Lists and/or charts can be used for monitoring and analyzing the data.
Empirically, you can rough out the daily volume accumulation in 30 minute intervals and use it to enter and exit the natural cycle of stock price movement. Lists and lookup tables would be used to do this.
On ES you can monitor and analyze by using geometry and agebra. Many many trading methods use one or more of these tools very successfully.
Indicators were designed and in use long before the PC was invented. Their persistence of use is based upon their filtering powers with respect to market activity and trading successfully.
One very important consideration is the trader. Most people cannot trade successfully. If a potential trader does not do personal development of his strengths and always ignore his weaknesses, he will never gain the enduring performance his talents provide. Trading successfully is just a matter of using natural talents with the correct tools. Tools are abundant.
If a person has little math talent who cares. Every person does have some talents. He can use talents (whatever talents he has developed) to become a strong trader.
You do not have to know volume follows a catinary intraday to creat a look up table; you can simply do a few hunderd thousand samples and get the answers for a look up table.
From that you can see how in the am of the first day of a new position trend in price appears even before the price begins its trip. Similarly, you can see the end of a trend when voume does not keep up.
What is it like to do 100 such trades a year @ 10% a trade by using trend monitoring and analysis for trading?
The mathematics of trading is done on a high school level.
think of it as the 1 out of 1000 being the farmer and the 999 being the chickens,he feeds them they make eggs ,he gets rich, the reason trends end and zig zag is that farmer feeding the chickens, if he just slaughtered em all and took a big payday, he would be out of business,so the herd or the trend and the reversing of it is necessary for the farmer and the chickensQuote from Texasdj:
No, therein lies the issue. first, if it can proven that trends don't exist in the stock market, what exactly are you trading?
Furthermore, to other posters who mentioned the herd, sentiment and crowd psychology as to why "trend following" works--- your entire premise is faulty--- as is behavioral finance imho.
It is not the herd, crowd, or group of participants that move the markets--- it is the density of money ( for lack of a better term )
for example, the crowd may be 1000 strong, but one, solitary trader can control more capital than all 1000 of the crowd--therefore it matters not what the crowd or group does as its the money that moves the market regardless of how many or few control it---
I just destroyed the entire premise of TA, trends, charts and behavioral finance---- book coming soon....
Exactly! Some people have excess irony to deliver around instead of asking for help.
It is easy to show, I have not done this myself, I read it in a book, that in the case of trend following, the avg. win to avg. loss ratio is not constant but depends on future trends. Since the win rate is inversely related to the ratio in the form
W = PF/(PF+R)
it can be easily seen that it is not true that W for trend following systems can be low, even much below 30%, because it all depends on the size of a future trend gains versus the accumulation of losers due to choppy/sideways markets. If you have a low W, like hitting a gain due to a trend in every 10 trades, and even with R = 10, your PF will be just 1.1, no better than random.
This is one reason getting a trend following edge is very hard.
Rodney KIng should be grateful some people are willing to enlighten him free of charge.
What i find interesting is the coin toss analogy.
I don't wish to take sides as the debate is interesting and nice to have opposing views.
Firstly though, the coin toss, are trends identified in coin tossing only a theory which has unfounded roots?
is it hearsay only, perhaps a myth?
Has anyone here actually physically done it themselves?
My suspicions are this coin toss trend is predominantly BS, ie, someone may have tossed a coin a million times once and for 20 tosses they spotted a trend, the other 999,980 times there were just random spots on a spreadsheet.
But they claim trends always exist in coin tossing. I call BS.
Another thing, if no trends exist except randomness in stocks, we have a world full of fools.
Every time the USA markets rise, so do most stocks follow around the world.
eg, if DOW up, so goes Australia and UK and elsewhere.
In other words, fund managers are fools, because USA is up they believe markets will rise, but aren't they fools?
A coin toss implies the next head or tail could be anything but the foolish world believes the next coin toss of the markets will be up as well.
I don't wish to take sides as the debate is interesting and nice to have opposing views.
Firstly though, the coin toss, are trends identified in coin tossing only a theory which has unfounded roots?
is it hearsay only, perhaps a myth?
Has anyone here actually physically done it themselves?
My suspicions are this coin toss trend is predominantly BS, ie, someone may have tossed a coin a million times once and for 20 tosses they spotted a trend, the other 999,980 times there were just random spots on a spreadsheet.
But they claim trends always exist in coin tossing. I call BS.
Another thing, if no trends exist except randomness in stocks, we have a world full of fools.
Every time the USA markets rise, so do most stocks follow around the world.
eg, if DOW up, so goes Australia and UK and elsewhere.
In other words, fund managers are fools, because USA is up they believe markets will rise, but aren't they fools?
A coin toss implies the next head or tail could be anything but the foolish world believes the next coin toss of the markets will be up as well.
--------------------------------------------------------------------------------
Quote from ProfLogic:
Excellant question . . . . yes, but it a whole lot harder to extract consistent profit from it.
--------------------------------------------------------------------------------
No, therein lies the issue. first, if it can proven that trends don't exist in the stock market, what exactly are you trading?
Furthermore, to other posters who mentioned the herd, sentiment and crowd psychology as to why "trend following" works--- your entire premise is faulty--- as is behavioral finance imho.
It is not the herd, crowd, or group of participants that move the markets--- it is the density of money ( for lack of a better term )
for example, the crowd may be 1000 strong, but one, solitary trader can control more capital than all 1000 of the crowd--therefore it matters not what the crowd or group does as its the money that moves the market regardless of how many or few control it---
I just destroyed the entire premise of TA, trends, charts and behavioral finance---- book coming soon....
=======================================
Above two people argue about making money using trend monitoring and analysis.
As we see publishers are gullible when it comes to viewpoints of market observers.
It is facetious to argue about proving something doesn't exist.
Anything that works for trading is valid; the range goes from luck to detailed tick by tick precision.
What is wonderful about the markets is that the minority control the markets. I am speaking in the money making sense.
Take a very large trader, whales as they are often referred to. Who does the whale face to make money. His opposite.
If many other whales are there to face him what happens? In terms of price change for making money, little or nothing happens.
I trade big money parasitically. Why? Because big money pushes me and my position. I stay on the correct side of the market at all times.
How does big money trade? One of the more active times of the day is during settlement. How does settlement determine market direction? What do mutual and hedge funds do to complete their settlement efforts each day? My bet is that they do trading.
They outnumber small retail traders by factors of 1,000 to 100,000 to 1. they control money and capital.
When a whale goes to the market to trade who does he face if there are not other whales there?
He has to parcel out his capital or sell his positions according to who and how many are available to face him.
What do experts at making money do when they deal with whales? Larry Harris explains it all.
All trading has to do with partial fills. Timing the trading of partial fills is what the expert does.
David Goodboy is a finder for organizations that trades as whales. OPM is what whales use to trade. Whales need and pay for getting OPM to trade.
If a whale has to trade what happens to the whale? He takes it in the shorts simply because there are not enough traders facing him in his actions. He has to deal in partial fills by eating up or down his opposites.
If a whale wants to take a long position he has to find a lot of willing sellers to take his trade. He run out of sellers on a given DOM level. What happens next? If he continues to take a long position, he has to pay more at the next higher DOM level or he waits until more people come to the market to trade.
Whales it seems trade in pods and rarely are facing each other. they usually all face in the same direction.
How does a whale check out the other whales? They all check one thing. They do it with computers.
The herd turns out to be the pod of whales.
So what did Larry Harris say about who deals expertly with whales? He was very succinct. Four of the 32 boxes in his chart on page 199 show just who beats the whales in trading.
William J O.Neill wrote about the whales and gave their activities two names. He also invented the measures of these two activity names. He also reports out these two activities in his services and publications.
How does it all turn out? there are many many books on the performance of the whales. In aother thread several are mentioned and quoted and their performance varies from year to year.
Anyone who uses the measures of what whales are doing can be pushed by the whales in a very profitable manner.
Whales have two distinct dissadvantages: size and timing. As a consequence they only make 20 to 50% a year in the markets. They do make money in fees and commissions by managing OPM.
These two guys will keep arguing and neither will figure out what they say is difficult.
Quote from ProfLogic:
Excellant question . . . . yes, but it a whole lot harder to extract consistent profit from it.
--------------------------------------------------------------------------------
No, therein lies the issue. first, if it can proven that trends don't exist in the stock market, what exactly are you trading?
Furthermore, to other posters who mentioned the herd, sentiment and crowd psychology as to why "trend following" works--- your entire premise is faulty--- as is behavioral finance imho.
It is not the herd, crowd, or group of participants that move the markets--- it is the density of money ( for lack of a better term )
for example, the crowd may be 1000 strong, but one, solitary trader can control more capital than all 1000 of the crowd--therefore it matters not what the crowd or group does as its the money that moves the market regardless of how many or few control it---
I just destroyed the entire premise of TA, trends, charts and behavioral finance---- book coming soon....
=======================================
Above two people argue about making money using trend monitoring and analysis.
As we see publishers are gullible when it comes to viewpoints of market observers.
It is facetious to argue about proving something doesn't exist.
Anything that works for trading is valid; the range goes from luck to detailed tick by tick precision.
What is wonderful about the markets is that the minority control the markets. I am speaking in the money making sense.
Take a very large trader, whales as they are often referred to. Who does the whale face to make money. His opposite.
If many other whales are there to face him what happens? In terms of price change for making money, little or nothing happens.
I trade big money parasitically. Why? Because big money pushes me and my position. I stay on the correct side of the market at all times.
How does big money trade? One of the more active times of the day is during settlement. How does settlement determine market direction? What do mutual and hedge funds do to complete their settlement efforts each day? My bet is that they do trading.
They outnumber small retail traders by factors of 1,000 to 100,000 to 1. they control money and capital.
When a whale goes to the market to trade who does he face if there are not other whales there?
He has to parcel out his capital or sell his positions according to who and how many are available to face him.
What do experts at making money do when they deal with whales? Larry Harris explains it all.
All trading has to do with partial fills. Timing the trading of partial fills is what the expert does.
David Goodboy is a finder for organizations that trades as whales. OPM is what whales use to trade. Whales need and pay for getting OPM to trade.
If a whale has to trade what happens to the whale? He takes it in the shorts simply because there are not enough traders facing him in his actions. He has to deal in partial fills by eating up or down his opposites.
If a whale wants to take a long position he has to find a lot of willing sellers to take his trade. He run out of sellers on a given DOM level. What happens next? If he continues to take a long position, he has to pay more at the next higher DOM level or he waits until more people come to the market to trade.
Whales it seems trade in pods and rarely are facing each other. they usually all face in the same direction.
How does a whale check out the other whales? They all check one thing. They do it with computers.
The herd turns out to be the pod of whales.
So what did Larry Harris say about who deals expertly with whales? He was very succinct. Four of the 32 boxes in his chart on page 199 show just who beats the whales in trading.
William J O.Neill wrote about the whales and gave their activities two names. He also invented the measures of these two activity names. He also reports out these two activities in his services and publications.
How does it all turn out? there are many many books on the performance of the whales. In aother thread several are mentioned and quoted and their performance varies from year to year.
Anyone who uses the measures of what whales are doing can be pushed by the whales in a very profitable manner.
Whales have two distinct dissadvantages: size and timing. As a consequence they only make 20 to 50% a year in the markets. They do make money in fees and commissions by managing OPM.
These two guys will keep arguing and neither will figure out what they say is difficult.