Trend Following--Another Nail In The Coffin

Quote from marketsurfer:

interesting. I agree with the first line....However not with the rest of your statement. Institutional investors dont always make winning trades. See JWH over the last several years, etc. The retail guy following JWH's trades would have been wiped out multiple times. You are talking about sub trends in the last line??
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Surf,

Instead of boring everyone with your never ending discussion with Proflogic, just cut to the chase man. What you want to know is whether trend following is a superior strategy to buy and hold correct?

Firstly, acknowledge that it is statistically patently stupid/unreasonable to focus on just one manager's performance as an indictment of trend following. If you think of trend following as a strategy, then consider each manager as one data point in a sample of managers. To test the performance of the whole sample, then run significance tests (student t would be a good start because we don't have the true population stdev) on the data and see if you can reject the null hypothesis that trend following returns are no better than the average buy and hold long term return of the stock market, circa 7-8%.

I am sure the above has been done somewhere (if anyone has a link please post) and I can anticipate the result. What you will likely find is that the null will be rejected even using higher power tests. However, you will likely also find that the volatility of the returns is higher than the stock market's and hence, it makes more sense to think of trend following as an ASSET CLASS and not the one and only get rich quick strategy.

I'm pretty sure Niederhoffer has looked into the return of the trendfollowers and probably has a LOT To say about the statistical significance of their returns. Since you are close to him, would you care to ask him and share with the rest of us? Since I no longer live in NYC, I cannot attend a Junto meeting and ask him myself.
 
Here is my input:

I care less about trend or counter trend systems......I care about a good money management system that will allow me to make a high probability trade and let the market confirm or stop me out. When I get a move my way that I can use options to lock in profit and take some risk off while still having big upside. I do that over and over with any dam system and that math works out.

These world famous trend follows are so stuck on their 'Trend System" that most do not even look at puts or some option ration trade that will not only decrease their draw down but also enhance the upside and take of risk.

Their religious attitude does not let them make a change in the systems or MM component of that specific system. Some very basic options plays will only help these managers with the stats and help preserve capital.

Are there any Trend Following managers that take an option approach to this style? If so, please educate me or give up a name and they can outperform the old school trend types in most markets environments.

Time to adapt and add a new wrinkle.
 
Quote from Maverick1:

Surf,

. What you want to know is whether trend following is a superior strategy to buy and hold correct?
.
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No, my contention is trend following IS buy and hold or sell and hold whatever the case may be.

remember, i am only talking about covell style trend following as he is the lead evangelist of the movement.

do i know you?

regards

surf
 
"market climbs a wall of worry."

The very notion of worry-wall climbing says a lot about how markets operate. They can't climb walls of optimism, because whatever makes investors as a group feel optimistic at any given time is almost certainly already reflected in stock prices.
To push stocks higher, the market needs new buyers who are just getting over some worry or concern.


Quote from ProfLogic:


We all, even smurf, understand that a Bull Trend is price making HH/HL/HH/HL/HH etc. and a Bear Trend is price making LH/LL/LH/LL/LH etc. but the rub is that most traders, because they can't define specific parameters that make up "A" trend, forget that the pull back in the trend is as important as the trend itself because IT IS what SUSTAINS the TREND.
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Quote from marketsurfer:

If you want to change the method, you should call it something else.

regards

:)
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Ok, it isn't Trend Following (never was) it is "Trading with the Trend" because we don't follow the Trend, we trade with it.

We enter the trade from support toward resistance, WE DO NOT ENTER THE TRADE AFTER PRICE BREAKS RESISTANCE.
We enter the trade from resistance toward support WE DO NOT ENTER THE TRADE AFTER PRICE BREAKS SUPPORT.
 
buy and hold assumes no risk management. that is not how trend followers have made careers.

Quote from marketsurfer:

No, my contention is trend following IS buy and hold or sell and hold whatever the case may be.

regards

surf
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Quote from marketsurfer:

No, my contention is trend following IS buy and hold or sell and hold whatever the case may be.

remember, i am only talking about covell style trend following as he is the lead evangelist of the movement.

do i know you?

regards

surf
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Nope, you don't.

If that is your contention, then your hypothesis is simply that trend following returns = 8% (the average buy and hold longer term return). And the same tests of significance can likely be computed in less than 10 minutes if the data is trustworthy and available. My hunch is that the data (adjusting for survivorship bias) is likely very hard to find.

But I'm willing to bet that it's been analyzed. Again, you've had the privilege of being friends with a strong thinker such as Vic, has he had anything to say about the statistical significance of trend following returns?

Would appreciate your reply, thx.
 
Quote from Lights:

surf, question about your long oil position. Do you not require an uptrend in oil for it to be profitable?
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yes, of course. however, following the past trend had nothing to do with my entry.

off to the biggest party on the east coast this evening--with charles, camille, and rod. LMAO! i'll address the other posters after I return tomorrow.

http://www.nbc10.com/news/10860178/detail.html


see ya,

surf:D
 
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