Is LONG the same as SHORT?

A

abattia

I design (and trade) intraday systematic strategies (for automated trading of US stocks).

Each time I start work designing something new, I begin under a sort of guiding assumption that long set-ups may be treated simply as mirror images of short set-ups. Therefore, I design my strategy to handle both. And when I analyze the finished product, I consider the various metrics (e.g. # trades, % Winners, % Average Trade, Sharpe Ratio, Cumulative Return, etc) mainly on an agnostic blended (i.e. longs/shorts together) basis.

Obviously, there are times when running a “blended” (i.e. both long and short) strategy when say intraday long trades do better than short trades (perhaps, for example, in an overall rising intraday market). Easily enough, of course, a signal might be designed for inclusion in the strategy to say switch off the short trades in these times.

But there are other ways in which long does seem to differ from short, regardless of overall market direction; for example, when a market falls, it will often seem to fall faster than it climbs, fear and greed making their marks differently on longs and shorts.

So, I am wondering whether I would be better off always “splitting” a strategy into long and short from the outset, i.e. always analyzing, optimizing, and trading, and altogether treating separately, the long trades from the short, essentially ignoring the strategy's "blended" characteristics?

Wasted effort?

Fundamentally flawed?
 
personally, i have found that my strategy works alot better on the long side. -regardless of overall trend conditions. i have gotten to the point where i dont even look for shorts.
i never understood it but recently i came across a academic study of TA particularity the rsi. and they said it was shown to be almost random for shorts but had some effectiveness for long.
i am not saying longs are better then shorts all things being equal but there does seems to be a fundamental difference among them.
 
Depending on the market, long and short are different animals and must be treated differently. For currencies, they are the same. For stocks, long is a major attribute and short is minor. Short provides the spring board for longs. The natural tendency of stock markets is up.

In the case of commodities, well, I tell you, start thinking only long....:)
 
Quote from rtstrading:

Stock market always up....tell that to the Japanese!
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Even that has a small upward slope in the long term if you know how to draw straight lines. That doesn't mean this slope is better than risk free return but there is an upward slope so I guess you are wrong if you think otherwise. :)
 
Quote from abattia:

I design (and trade) intraday systematic strategies (for automated trading of US stocks).

Each time I start work designing something new, I begin under a sort of guiding assumption that long set-ups may be treated simply as mirror images of short set-ups. Therefore, I design my strategy to handle both. And when I analyze the finished product, I consider the various metrics (e.g. # trades, % Winners, % Average Trade, Sharpe Ratio, Cumulative Return, etc) mainly on an agnostic blended (i.e. longs/shorts together) basis.

Obviously, there are times when running a “blended” (i.e. both long and short) strategy when say intraday long trades do better than short trades (perhaps, for example, in an overall rising intraday market). Easily enough, of course, a signal might be designed for inclusion in the strategy to say switch off the short trades in these times.

But there are other ways in which long does seem to differ from short, regardless of overall market direction; for example, when a market falls, it will often seem to fall faster than it climbs, fear and greed making their marks differently on longs and shorts.

So, I am wondering whether I would be better off always “splitting” a strategy into long and short from the outset, i.e. always analyzing, optimizing, and trading, and altogether treating separately, the long trades from the short, essentially ignoring the strategy's "blended" characteristics?

Wasted effort?

Fundamentally flawed?
More...

I have found that treating long and short trades differently (although only in the design of an exit strategy) has increased returns. For entries, I utilize the same setup and trigger for both.
 
Quote from logic_man:

I have found that treating long and short trades differently (although only in the design of an exit strategy) has increased returns. For entries, I utilize the same setup and trigger for both.
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Nice angle! Thanks!
 
Quote from intradaybill:

Even that has a small upward slope in the long term if you know how to draw straight lines. That doesn't mean this slope is better than risk free return but there is an upward slope so I guess you are wrong if you think otherwise. :)
More...
A 27 year period of 0% total returns, adjusted for dividends and inflation is not an upward slope.
 
Quote from Butterball:

A 27 year period of 0% total returns, adjusted for dividends and inflation is not an upward slope.
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Another one that cannot draw a straight line through a couple of points on a 2-dimensional plane.
 
Quote from intradaybill:

Depending on the market, long and short are different animals and must be treated differently. For currencies, they are the same. For stocks, long is a major attribute and short is minor. Short provides the spring board for longs. The natural tendency of stock markets is up.

In the case of commodities, well, I tell you, start thinking only long....:)
More...

Also in FX different animals. Since some currencies are treated as safe-havens and move suddenly in one direction in times of fear and slowly in another.
 
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