trend following delusion shattered

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He wrote:

"September, 2001 was a historic occasion for the stock market, but not for the obvious reason. "

The "obvious reason" he's referring to is 9/11, no?


Quote from easyrider:

Not sure why youre addressing this to me. All I said was Im surprised he did not mention 9/11/2001 in the article, the inference being that fear became a constant in market prognosis from that time forward.
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Quote from marketsurfer:

ok, i agree that anecdotes prove nothing. however, "trade with the trend" means nothing also--except in hindsight--after the entry.

are you able to show me one test or statistic that proves that trends ( as they are commonly understood--- (higher highs, higher lows, lower highs, lower lows) provide any sort of edge to the trader?

thanks!

surfer
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Buy low, sell high.

What is that advice based on except trending? In order to go from low to high, or vice versa, price must trend.

Your problem is confusing the principle "trade with the trend" with the practical application. Just like "be good" is easier said than done, so is "trade with the trend". The devil (or God) is in the details. How does one trade with the trend? There's the rub: not whether one should trade with the trend, but how.

There are three possible answers:

1) it can't be done.

2) it can be done, but those who know don't say.

3) it can be done, but those who know and say are generally ignored, like Cassandra.

Take your pick.
 
Quote from risktaker:

He wrote:

"September, 2001 was a historic occasion for the stock market, but not for the obvious reason. "

The "obvious reason" he's referring to is 9/11, no?
More...

Damn. I need to take more time reading posts. I read it twice and still bypassed this first sentence somehow. Please ignore me from now on. This forum has one great benefit. Every time I think I am ahead of everyone else it slaps me down and this is probably a good thing.:)
 
Quote from marketsurfer:

sure, after they happen, anyone can see them. trends only exist in the past.
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Dave, perhaps you're letting semantics get the better of you. Instead of 'trend following' substitute 'break out system'. That is basically what the turtles do anyway.

They attempt to take a position before a persistent price movement has begun with the hope of riding it if/when it does unfold. Sometimes it does and sometimes it doesn't.

No 'break out system' pretends to know the future or whether persistent movements will indeed happen. They only want to take the trade and let expectancy sort out the rest.

Hope that helped.
 
Quote from Babak:

Dave, perhaps you're letting semantics get the better of you. Instead of 'trend following' substitute 'break out system'. That is basically what the turtles do anyway.

They attempt to take a position before a persistent price movement has begun with the hope of riding it if/when it does unfold. Sometimes it does and sometimes it doesn't.

No 'break out system' pretends to know the future or whether persistent movements will indeed happen. They only want to take the trade and let expectancy sort out the rest.

Hope that helped.
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random entries accomplish the same goal, so does buy/sell and hold.

3 moves ( insert time frame) up-- has absolutely no barring on the 4th and subsequent moves-- will they be up, or down? the concept of trend trading makes no sense whatsoever--- other than stay with winners , cut losers---

in fact, placing a trade in the present direction of the 3 moves ( this is an example, insert any number or time frame) is a statistically inferior method in the stock indexes--- see "how markets really work" by connors for the studies.

best wishes,

surfer
 
Quote from kut2k2:

Buy low, sell high.

What is that advice based on except trending? In order to go from low to high, or vice versa, price must trend.

Your problem is confusing the principle "trade with the trend" with the practical application. Just like "be good" is easier said than done, so is "trade with the trend". The devil (or God) is in the details. How does one trade with the trend? There's the rub: not whether one should trade with the trend, but how.

There are three possible answers:

1) it can't be done.

2) it can be done, but those who know don't say.

3) it can be done, but those who know and say are generally ignored, like Cassandra.

Take your pick.
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no, let me see if i can explain.

the trend does not exist in the future, and the future is where your trade is after you make the entry--with me so far??---every study i have ever seen/done indicates that there is no edge in entering a trade in the same direction (trend) as price in the indexes. in fact, the opposite is actually true.

trend trading is the same as buy/sell and hold--- see the trend funds abysmal recent performance to verify that they don't close positions very quickly.

if you flip a coin 6 times, and it comes up heads 6 times--- are you in a heads trend?

best,
surfer
 
you are using the "talented coin" analogy.

it is a poor analogy for the following reasons.

every coin flip is random

price movement is not random.

price movement is based on - opinion ie supply/demand.

at a minimum, if people think that the fact that stock X is moving up is "bullish" that will result in their opinion that it is a buy, and thus we go with greater fool theory.

coins have no memory, no opinion, and no emotion.

people do. people make up a stock market.

so, it's a bogus analogy.

again, at a minimum - trend following is (to some extent) self-fulfilling.

but more importantly, prices do not exist in a vacuum, nor are they random. people make judgments about price. coins do not make judgments about the result of their flips. emotions play a part in the stock market. and emotions are generated, among other reasons, based on people's fear, greed, euphoria, etc.

that, for example, is how bubbles form. they form because of emotional excesses. coins don't have emotional excesses.
 
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