Quote from drm7:
While trend following is tough in intraday timeframes, the strategies have been shown to work consistently in longer-term timeframes.
Why don't you overlay a simple trend system with a longer tempo? On a diversified portfolio, buying on the highest high of the last 20 hours/days/weeks and sellling/shorting on the lowest 20 hour/day/week low (or any similar strategy) may not make huge returns, but will probably have a positive expectation over the long run.
Furthermore, the CT strategy will most likely make the most profits when the longer-term trend strategy is in drawdown, and vice-versa. The result? A less-steep but smoother equity curve.
Your CT strategy is a "short volatility" strategy (lots of small gains and few big losses). A trend strategy is "long volatility" (lots of small losses and a few huge gains.)
Hi drm7, thank you for the inspiring input.
Yes you are right. Coordinating the two components CT and T (trend system) is actually what motivated the latest efforts and assessments to determine which T games work best with CT. In fact, i felt that past data provided too little information (and danger of <b>"curve fitting"</b>) to that purpose.
My current "panel" for strategy rules has evolved in something as shown below, where i also added the T component.
<img src="http://www.datatime.eu/public/gbot/StrategyRules.jpg" />
On the right you can see some simple settings to control the <b>"Trend system"</b>.
Now your emphasis is essentially on timeframe and, i might guess, also on independence of the trending system.
The reason why i am attempting to make work the Trending component dependent on the CT is because i am looking at it essentially as an <b>"hedging" device</b>. Why am I doing that ? Well if a trader is trading CT only, <b>he can ** in any case ** also trade with another system, independently, which works with trend</b>. The point of putting together CT and T in the same system seemed to make more sense to me if the Trending game could somehow interact with CT to offer protection when actually needed.
In fact, as you correctly point out, CT by its nature tends to greedily grab relatively smaller profits, but because of that it may be draw down by adverse price move. At this point T should enter to protect, while not spoiling the CT game.
Your other point is about timeframe. At early stage of this development i have been thinking a while what "time" should mean in the context of trading. Should we really care of "absolute time", or what matters is actually the <b>"price movement" occurred during that time</b> ? For instance, a distance equal to 2 "scalp sizes" could be covered in 1 minute or, in a slowly market, in 2 days. Do do we really care about this time interval ? I somehow resolved that my "watch" should have a "clocking" mechanism based on "price alone". Don't' know if you have seen this video here
http://www.youtube.com/watch?v=KHjpBjgIMVk&feature=related there is a photon clock. Somehow it's like if we used the "price" in place of that photon ;-))
Therefore, i use to "slice" the price curve (those green lines you see on the trading window) and take <b>"spaced decisions"</b> based on price movement, to be sure to have strict control on PNL.
For sure, one could let in any case let a trend system run independently. That would provide a more generic sort of "protection", not necessarily "in sync" with the countertrending entries. Which may still be pretty good.
Tom
