I would say for every trend trader blowout there is a mean reversion based trader who blows out. That goes the other way too for successful traders. I think the buy higher highs works well in real bull markets that produce a lot of interest -- this can be a bull market in a commodity or in a stock. It just depends on how you apply the strategy to how effective it is. I would think the returns of many reversion hedge fund are becoming smaller as all these funds compete for the same dollar. There have been a lot of reversion strategies that have become obsolete because too many people are doing them and the volatility is not in the market. So I think the same thing exists for trend traders, it just depends on how, what to, and when you apply the different stategies as to their effectiveness.
the basic flaws in TA
- Thread starter marketsurfer
- Start date
I would say for every trend trader blowout there is a mean reversion based trader who blows out. That goes the other way too for successful traders. I think the buy higher highs works well in real bull markets that produce a lot of interest -- this can be a bull market in a commodity or in a stock. It just depends on how you apply the strategy to how effective it is. I would think the returns of many reversion hedge fund are becoming smaller as all these funds compete for the same dollar. There have been a lot of reversion strategies that have become obsolete because too many people are doing them and the volatility is not in the market. So I think the same thing exists for trend traders, it just depends on how, what to, and when you apply the different stategies as to their effectiveness.
sorry, i did not mean to stir such emotive criticism, but i welcome it!
let's define trend following: isn't the term itself kind of meaningless? if you are making money, obviously you are with the trend, or losing money you are against the trend. THEREFORE, proper entries must be the hidden secret in getting with the trend. everything i have seen in print regarding trend following states buying higher highs and selling lower lows is how a trend follower enters the market. then, based on example, they HOLD and HOPE the trend they were trying to enter continues or resumes after a nice fat drawdown.
therefore, any directional fund that makes money is a trend following fund by default.
in addition, it seems that trend traders are spread across many markets, and the goal is to make the trends they catch bigger than the ones they miss--hence large sums of capital and even more risk is required to pull it off......
bring it on, show me the logical flaws.
surfer
ps. happy you came out of hiding!
there's a comma there, bro. option spreads was another strategy. no , i am not a randomer.
perhaps a rand o mer. surf
Interesting point.
I wonder what happens if you restrict the criteria to traders who have been around, say, 15 years or longer.
Under that restriction I wager that (surviving) trend followers would outnumber (surviving) mean reverters by at least three to one (not counting floor traders), and that trend followers would crush the mean reverters in terms of absolute dollar profits made and kept.
(I am by no means a member of the trend following 'cult', by the way, and have stated as much multiple times on this board.)
i have much respect for you darkhorse. your logic is generally flawless--- but we must define trend follower, it seems to me that the pubic are trend followers by default.....
surfer
Quote from marketsurfer:
let's define trend following: isn't the term itself kind of meaningless? if you are making money, obviously you are with the trend, or losing money you are against the trend. THEREFORE, proper entries must be the hidden secret in getting with the trend. everything i have seen in print regarding trend following states buying higher highs and selling lower lows is how a trend follower enters the market. ..
I don't think that the first statement holds up logically, that is the "if you are making money, you are with the trend, if losing against it". That is laughable. I can be trading in a trend and lose money, and the existence of that trend will be true irrespective of whether I profit from it or not. Whether I profit from it is a function of my skill in exploiting the trend, not the existence of the trend itself.
You are asking for too much Surfer, no one is going to give you the 'proper entries' to trade trend, you either figure them out yourself and make beaucoup money, or you miss out. No one will hand you the keys to the kingdom.
What you have seen in print is by definition, limited, and hence, insufficient to draw conclusions from.
Now before bringing up your dumb coin toss argument again, think twice about doing that, I would kindly refer you to a thread started by oddiduro where the weakness of that argument and any kind of 'serial correlation' type college freshman math was exposed for its stupidity. You can't hack away at the gold mine with a plastic teaspoon Surf, wake up.
Quote from marketsurfer:
sorry, i did not mean to stir such emotive criticism, but i welcome it!
let's define trend following: isn't the term itself kind of meaningless? if you are making money, obviously you are with the trend, or losing money you are against the trend. THEREFORE, proper entries must be the hidden secret in getting with the trend. everything i have seen in print regarding trend following states buying higher highs and selling lower lows is how a trend follower enters the market. then, based on example, they HOLD and HOPE the trend they were trying to enter continues or resumes after a nice fat drawdown.
therefore, any directional fund that makes money is a trend following fund by default.
in addition, it seems that trend traders are spread across many markets, and the goal is to make the trends they catch bigger than the ones they miss--hence large sums of capital and even more risk is required to pull it off......
bring it on, show me the logical flaws.
surfer
ps. happy you came out of hiding!
Haven't been in hiding, just busy. (Still very busy.)
Proper entries, or rather entries in general, are neither the key nor the hidden secret to making money as a trend follower. On a page of key criteria, entries would probably come halfway or three quarters down the list. Not that they have zero importance -- there are just a lot of other things with far higher importance.
I am genuinely surprised you did not already know this. As I have mentioned, I am not a member of the purist trend following school -- but I have conducted extensive research and study of trend follower methods, because they have been so successful for so long.
In conducting even light research, the relative LACK of importance regarding entries -- in comparison to other things -- is one of the first things that comes to light. For you to not know this suggests you have skimped on your homework.
Your comments about all firms being trend followers in the broad sense just dilutes the original debate. There is a clear school of methodology and thinking classified as 'trend following,' applied to a very specific and easily recognizable subset of traders and money managers, that is wholly separate and easily recognizable from the generic meaning of the term. Conflating the specific reference with the general reference serves no useful purpose that I can see.
When you talk about holding and hoping, you are not talking about successful trend followers. These guys either have advanced degrees in statistics or have someone on staff that does. While their algorithms are not complicated, they are mathematically precise and backed up by years of research and ongoing testing.
How can you confuse a firm with $100mm plus under management with Joe Blow trading ten grand in his pajamas? Your assumptions are so elementary it's as if we were in remedial trading 101. Again it's not my intention to be offensive, just calling it like I see it.
I'm outie. Back into 'hiding' again.
What is the difference between trendfollowing and "statistics"-following? Aren't they both from the school of what-has-happened-before-will-happen-again trading? Doing a trade because it's worked the last nine times -- what's the difference between that and buying because it's gone up the last nine days?
Mean Reverters versus Trend Followers.
Here is a very obvious answer. The sum of the major daily gyrations (eg DOW index), that is the daily totals added together during any trend, is greater than or a multiple of any trend of a few days, a week, a month or whatever.
Even so, should reverters be reverting to the mean .. which mean?
Here is a very obvious answer. The sum of the major daily gyrations (eg DOW index), that is the daily totals added together during any trend, is greater than or a multiple of any trend of a few days, a week, a month or whatever.
Even so, should reverters be reverting to the mean .. which mean?
Quote from Cheese:
Mean Reverters versus Trend Followers.
Here is a very obvious answer. The sum of the major daily gyrations (eg DOW index), that is the daily totals added together during any trend, is greater than or a multiple of any trend of a few days, a week, a month or whatever.
Even so, should reverters be reverting to the mean .. which mean?
There aint no mean with infinite variance, a point lost on many 'enlightened' critics of trendfollowers... Can you imagine someone walking up to Soros and saying, hey George, you're nuts man to talk about trends in your book, reflexivity, bah!, what a bunch of nonsense... LOL