trend following delusion shattered

[NickelScalper]

Quote from Spydertrader:

I'm not sure if what follows meets the criteria you set forth above. However, I use the methods everyday.

My Tools: Price and Volume.

For a specific set of stocks, the relationship between price and volume allows me to anticipate a "specific difference between present and future price."

Using the following two assumptions:

If Volume is increasing, then Price will continue its trend over time.
If Volume is decreasing, then Price will change its trend over time.

I arrive at the following:

If Volume is increasing, with an increasing price, then price will continue to increase.

If Volume is increasing, with decreasing Price, then price will continue to decrease.

If Volume is decreasing, with increasing price, then price will begin to decrease.

If Volume is decreasing, with decreasing price, then price will begin to increase.

I begin by creating a Universe of High Quality Stocks (top 90% of EPS and RS Rank). I further refine the list by focusing on those stocks that cycle a minimum five times in six months for gains of 20% or more occurring over 6 to 8 days.

Finally, by comparing price, volume and accumulation / distribution, one can anticipate trend continuation or trend reversal with a certain degree of accuracy when a specific set of criteria have been met previously. Without delineating the exact criteria used (Interested individuals can locate the methods used in my Journal for additional detail), I have enjoyed profitable results with these methods over the last three years.

Now, I cannot anticipate correctly everyday (at least not yet) because the specific set of criteria I require do not appear each trading day (or I do not yet poses the experience required to recognize the set ups in real-time or hindsight on days I determine "no signals exist"). I don't claim to know the future everyday, and I don't claim 100% accuracy when the specific signals required for correctly anticipating trend reversal or continuation do appear. However, the signals appear with enough frequency and prove correct with enough regularity to permit me to make a living.

On the surface, it appears to me, that my methods contradict your theorem outlined above. However, I'll leave it to those with far more experience than I to determine if I met the criteria you specified.

- Spydertrader

Thank you for the considered response.

The specific criteria are met, or not, in an experimental setting.

Not that it proves anything, but I'm immediately skeptical of the efficacy of such a system considering how much of your competition is looking for a method along just those lines. However, if it does work, you have my congratulations.

It's possible to verify your method by posting in real time to this thread when and on what specific basis you wish to invoke it, the instrument and a target price. How about Monday?

 

[hanseng1]

Quote from NickelScalper:

The point is that there is no combination of publicly available tools that can be used to determine a specific minimum difference between present and near-future price based on past price action. Your avoidance of the issue reveals your lack of an adequate response. Can you or can't you describe a suitable method, and if so, what is it?

As far as the meaning of "specific minimum difference between present and near-future price" goes, if you can't achieve such a difference, then you don't have a tradable edge.

Again, a circular response.

Please define exactly what you mean by "specific minimum difference between present and near-future price". If you can give me a clear meaning of this phrase, then I have an idea what you want to see. If not, this is just a complicated string of words with no meaning. You addressed my question by saying "if you can't achieve such a difference, then you don't have a tradable edge" but you never clarified the phrase in question.

Also, you are putting the burden of proof on my shoulders (i.e. a defensive stance). Can you prove what you say?

Edit: Does any one else find it a little pathetic that we all have nothing better to do on a Sunday than argue this question on an online message board? It's really quite sad......I find myself checking the boards like every 15 minutes or so.

 

[OldTrader]

Quote from NickelScalper:

What a wimpy reply to the challenge I presented.

Is that the best you got, an off-topic personal attack?

Perhaps you should re-read my post. I was not "replying to the challenge" that you presented. Nor did I attack you. Here's what I said:

NickleScalper:

I have reading your pontifications on "trendfollowing" for page after page. One question arises. Do you have a "method" of trading? Or do you simply "scalp" for a "nickel"? We all know what you don't believe....it might be interesting to know what you DO believe.

OldTrader

Seems to me that after reading page after page of your comments on "trend following" that it is a fair question to ask what you believe in. How do you feel that this question is an "off-topic personal attack"?

But one thing that does come to mind: a guy "scalping" for a "nickle" would probably not be the authority I would go to for an opinion on "trend following". What do you think?

But I will tell you this: there is no way a winning trader isn't FORCED to attempt to follow a trend. The minute you put a position on your goal is to see it move in a direction...period. In other words, you take the position with the idea that it will "trend" in your direction. It's really that simple unless of course you're "scalping" for a "nickle".

But perhaps you can simply answer the question that I asked to begin with.

OldTrader

 

[NickelScalper]

Quote from hanseng1:

Again, a circular response.

Please define exactly what you mean by "specific minimum difference between present and near-future price". If you can give me a clear meaning of this phrase, then I have an idea what you want to see. If not, this is just a complicated string of words with no meaning. You addressed my question by saying "if you can't achieve such a difference, then you don't have a tradable edge" but you never clarified the phrase in question.

Also, you are putting the burden of proof on my shoulders (i.e. a defensive stance). Can you prove what you say?

Edit: Does any one else find it a little pathetic that we all have nothing better to do on a Sunday than argue this question on an online message board? It's really quite sad......I find myself checking the boards like every 15 minutes or so.

Specify a combination of publicly available tools that can be used to determine a number d such that | p1 - p0 | is greater than or equal to d, where p1 is a near-future price and p0 is the current market price.

As far as proof goes, any proposed method, in this case price trend following, must be proven before it can be trusted as a basis upon which to trade.

 

[NickelScalper]

Quote from OldTrader:

Perhaps you should re-read my post. I was not "replying to the challenge" that you presented. Nor did I attack you. Here's what I said:



Seems to me that after reading page after page of your comments on "trend following" that it is a fair question to ask what you believe in. How do you feel that this question is an "off-topic personal attack"?

But one thing that does come to mind: a guy "scalping" for a "nickle" would probably not be the authority I would go to for an opinion on "trend following". What do you think?

But I will tell you this: there is no way a winning trader isn't FORCED to attempt to follow a trend. The minute you put a position on your goal is to see it move in a direction...period. In other words, you take the position with the idea that it will "trend" in your direction. It's really that simple unless of course you're "scalping" for a "nickle".

But perhaps you can simply answer the question that I asked to begin with.

OldTrader

First off, you literally replied to my challenge by quoting it in your post.

You used "pontifications" as a pejorative, so you engaged in a personal attack.

Whether or not I choose to scalp for nickels has no bearing on the validity of the arguments I put forward here.

 

[Spydertrader]

Quote from NickelScalper:

Thank you for the considered response.

You are most welcome. I had no intention of proving or disproving your theory. Rather, it appeared to me that my methods contradicted your statement. I hoped you could tell me why.

Quote from NickelScalper:

The specific criteria are met, or not, in an experimental setting.

I do actually trade these methods.

Quote from NickelScalper:

Not that it proves anything, but I'm immediately skeptical of the efficacy of such a system considering how much of your competition is looking for a method along just those lines. However, if it does work, you have my congratulations.

I encourage a healthy dose of skepticism by everyone who reads the Journal, and have received numerous warnings via email and ET PM warning me to stop giving away the secrets the big boys already use. I don't want anyone to believe on my word alone the successful results of the methods. I expect everyone interested to perform their own DD. I simply placed all the tools into one toolbox. The decision to use the tools placed there remains one of individual choice.

Quote from NickelScalper:

It's possible to verify your method by posting in real time to this thread when and on what specific basis you wish to invoke it, the instrument and a target price. How about Monday?

I have done this very thing each day for the last six months in my Journal focusing on a certain set of stocks posted the previous evening and monitoring their volume throughout the morning of the next day - determining if the system triggers a buy signal or not. In addition I have specified the steps required to perform the tasks by anyone interested without relying on my posts and decision making, in order for everyone following along to see in real-time exactly what I see. In the first few posts of the Journal I outlined the methods used to create a list of stocks to monitor, the exact entry criteria required for a buy signal to develop and the exact confirming parameters required to enter into a trade and hold beyond EOD.

 

[NickelScalper]

Quote from Spydertrader:

...

I do actually trade these methods.

...

Hey, I'd like to be wrong on this one.

Surf some trends while having a few of beers after the open, then hit the beach for the real thing by noon.

Oh, what a world it would be!

 

[OldTrader]

Quote from NickelScalper:


Whether or not I choose to scalp for nickels has no bearing on the validity of the arguments I put forward here.

Certainly it puts it all in a new perspective for us though now doesn't it?

You're the guy running the 50 yard dash trying to explain to the marathon runners why their race doesn't make any sense.

Thanks for the answer....I now know what value to put on your comments.

OldTrader

 

[ProfLogic]

Quote from hank rollins:

another observation on trend following.


trend following and buy/sell & hold are the same thing as proven by the HUGE drawdowns the trend following funds experience.

To make a statement like this is proof you have no clue "what" trading with the trend entails.

 

[OddTrader]

Quote from OldTrader:

Thanks for the answer....I now know what value to put on your comments.

OldTrader

More answers here:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=42501

Q
Posted by NickelScalper on 12-16-04 05:30 AM:

Re: So...

This trading plan requires a 1c gain on average per trade to offset commissions. Not difficult. To make any real profit requires an increase in the capital base, true enough. That comes after proof of concept.

Good trading.

__________________
Trading and baseball are diamonds in the rough.
UQ


Q
Posted by NickelScalper on 01-13-05 02:03 AM:

I'm experimenting with a new trading style, so there's an ambulance on standby.

This is intended more as a venue to record and review trades, rather than a scintillating and educational discussion thread. If the latter is what you're looking for, try someplace like Mr. Merchant's "Old Possum" journal up the street.

38.09 exit, for a 2 cent gain.
UQ