How to stop predicting the TOP
- Thread starter maxinger
- Start date
If a market is not trending ... duh there are opportunities both directions.
That is just it, I am neither bull nor bear on an intraday basis until the path of least resistance shows its hand. But there is more to it than that.
TPP - time, price, pattern is it.
Curious - how is it barely trending? Using which method and what timeframe/lookback period?
Just a quick visual on the daily/weekly chart shows that the S&P have been trending higher most of the time since 2009, yes?
How to define a trend is an interesting question though. i would not want to use a trend line, but a mathematical definition.
One way could be to compare the # of days net positive/negative and compare the averages. If I randomly select the last 100 trading days on ES (small sample size, I know, but just for a fast illustration):
61/100 days = positive net change
Average change = 0,12 %
Average positive net change = 0,50 %
Average negative net change = -0,48 %
An even simpler way may simply be to measure the price difference close to close. That would be 382,25 or 13,18 %.
Another way may be a simple MA. For the last 100 days - the ES closed above the 20-Day SMA 81/100 days.
Not an expert, but I tried to view it through this lens: https://en.wikipedia.org/wiki/Hurst_exponent
In short, if your time series has a drift up or down, then you have to sort of exclude that term to determine whether something is trending. In that sense, S&P is mean reverting over the last decade. Over all my data (from 1993) it's barely trending (H=0.51)
Interesting. I believe this was included in Trading Systems & Methods by Kaufman. Will take a look after the market close.
I should be clear that over all the data "barely trending" means it's a random walk(!)
By the time hurst has detected anything it's almost too late to make a trade unless you have long holding periods. Did you find a way to refine the method?
I wouldn't use it for that. Just to classify what it has been like.
As with all fixed or hyper-math conflated type cycles.
In this series of Nasdaq prices, if you sit down to trade and see that the daily trend is bearish, will you open short positions knowing that the downtrend can last very little?
I do not get it.
What is a trade?
Take a risk to try to win the highest number of points.
The moment you open bearish positions against the general trend, it may work out well, I agree with that, but I am sure you will not get the same amount of points in those trades.
So, I don't say I can't win like that.
I say that the trades will be lower quality trades than if it operates in favor of the general trend because those trades will get fewer points.
That is called Kamikazae trade and it doesn't usually end well.
The risk must be to obtain the greatest reward. Amen.
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