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Trend Following depends on Prediction
- Thread starter AFJ Garner
- Start date
Quote from ammo:
before laptop trading, the pit traders just traded the market,no chaRTS OR FEW AND THE CROWD MENTALITY,ORDER FLOW,MOST had trouble making the switch but some can still just trade long or short and recognize inately,follow the market
So why would a pit trader take a long position if he wasn't reasonably sure the market would go up?
"Following the market" is still predicting. The point at which you decide to follow the market is a prediction of future direction.
Quote from 1a2b3cppp:
So why would a pit trader take a long position if he wasn't reasonably sure the market would go up?
"Following the market" is still predicting. The point at which you decide to follow the market is a prediction of future direction.
A true trend following trader does not care which way it will go after they get in.
They follow the flow of the market.
If going with the flow yields a profit then so be it, if it yields a loss then so be it.
It just so happens that going with the flow is net profitable in the long run (if done properly!)
Going with the flow does not require prediction.
What it does require is being able to maintain a high level of consciousness (being able to rise above fear, greed, impatience, anger with losses etc).
Most people can not do that!
Buying a breakout or whatever criteria is used, is not a prediction.
It only tells you what the market is doing now.
It doesn't and cant predict the future.
Humans need a heuristic for decision making.
"The market is breaking out now, im going with it. "
Thats all you are doing.
No one can predict the future state of the market, therefore when trend followers make or lose money, it isn't by prediction.
It came from going with the flow of the market, following the trend, in the now.
It only tells you what the market is doing now.
It doesn't and cant predict the future.
Humans need a heuristic for decision making.
"The market is breaking out now, im going with it. "
Thats all you are doing.
No one can predict the future state of the market, therefore when trend followers make or lose money, it isn't by prediction.
It came from going with the flow of the market, following the trend, in the now.
Quote from contra:
semantics?
if you are anticipating it will continue (following the market/trend) is that a prediction?
this is another one that has been debated to no end.
I say yes, same shit.
No you go are going with the flow, you dont anticipate which way it goes after you get in.
No one can do that, no one can predict the future of something so complex as the market.
Quote from slumdog:
No you go are going with the flow, you dont anticipate which way it goes.
lol whatever makes you sleep better at night.
You are putting your money on the line of an uncertain outcome.
That's a bet that you anticipate is correct.
I take off on a wave, I anticipate is will continue and I'll be able to ride it, but it could just close out.
Quote from slumdog:
No you go are going with the flow, you dont anticipate which way it goes after you get in.
No one can do that, no one can predict the future of something so complex as the market.
If you don't anticipate which way it goes, then your position would be flat. The only reason to take on market risk is to seek profit. If you think the market is wholly unpredictable then there is no reason to take on a position as your expected profit is zero minus transactions costs.
It is quite possible to make predictions about complex things. The weather is complex but I predict it will not be 200C tomorrow.
Quote from ammo:
before laptop trading, the pit traders just traded the market,no chaRTS OR FEW AND THE CROWD MENTALITY,ORDER FLOW,MOST had trouble making the switch but some can still just trade long or short and recognize inately,follow the market
But each trade is made in the expectation that this type of trade will be profitable if made enough times over the long run. That is a prediction about the future behaviour of the market.
Quote from slumdog:
It just so happens that going with the flow is net profitable in the long run (if done properly!)
So you are claiming that, in future, the market will trend enough to make trend following profitable. That is a statement about how the future will be I.e. it is a prediction. You just contradicted your whole argument.