price movement

Luke_P · Sep 9, 2006

It is assumed that price movement behaves the same for upward and downward movements. The trading strategies I've studied use the same rules for long entry as short entry. Does anyone have any insight as to whether this is actually the case? Many traders go short & long as if the direction didn't matter but behind that there are many participants who care about the direction.

I'm wondering if there are merits in having separate strategies for long trades and short trades. Are there any available studies on this?

Thanks

forex5x · Sep 9, 2006

I think it depends on your market.

Stocks have a tendency to move up slow and down fast so here two strategies would be better.

Forex is like two stocks competing so up and down are similar.
It may still be worth a look to take data into Excel and prove or disprove this assumption.

JimmyJam · Sep 9, 2006

Quote from Luke_P:

It is assumed that price movement behaves the same for upward and downward movements. The trading strategies I've studied use the same rules for long entry as short entry. Does anyone have any insight as to whether this is actually the case? Many traders go short & long as if the direction didn't matter but behind that there are many participants who care about the direction.

I'm wondering if there are merits in having separate strategies for long trades and short trades. Are there any available studies on this?

Thanks

In my observations of the differnt markets (stocks, futs, energy, bonds, curriences) they all have a tendency to move in that same pattern - I think perhaps this is due to the psychology of the move more so than the individual market that is being traded.

nazzdack · Sep 10, 2006

For what it's worth; confidence comes about slowly, pessimism comes about quickly. That's generally the reason why stocks & bonds rally slower than they decline. It's the opposite for physical commodities.

JimmyJam · Sep 10, 2006

Quote from nazzdack:

For what it's worth; confidence comes about slowly, pessimism comes about quickly. That's generally the reason why stocks & bonds rally slower than they decline. It's the opposite for physical commodities.

Thanks for the update nazzd, I learned something new here. I hoestly thought it was the same pattern for all tradables, but, actually the patterns makes sense considering the fact that:

1. stocks and bonds are paper folks, that's all they are, just paper.

2. commodities have a real existence in the physical world, they are physical objects.

Best,

JJ

edit: that's a nice piece of information.

nazzdack · Sep 10, 2006

Translation---------Stocks rally based upon hope for higher earnings. Commodities rally based upon fear of supply shortages.

JimmyJam · Sep 10, 2006

Quote from nazzdack:

Translation---------Stocks rally based upon hope for higher earnings. Commodities rally based upon fear of supply shortages.

OK,

So you are saying that stocks and bonds are based on information and commodities are based onsupply and demand?

Best,

JJ

Luke_P · Sep 10, 2006

Quote from nazzdack:

For what it's worth; confidence comes about slowly, pessimism comes about quickly. That's generally the reason why stocks & bonds rally slower than they decline. It's the opposite for physical commodities.

That is what I am trying to establish; if up and down moves behave differently. It is possible that this may contribute to why some discretionary traders are more successful than similar automated systems. Because subconsciously they understand how the market moves differently up and down.

It also seems like some might be hesitant to incorporate separate strategies for long and short because they feel if a strategy is good enough to trade, it would be wastefully to only use it for a single direction as up & down market behavior are "close enough".