Why Can't I Trade with the Trend
- Thread starter Flashboy
- Start date
Absolutely do trade off of them. IMO, there's nothing magical about them nor latent. It just visually fixes my app so that my clumsy brain doesn't panic with visual info I continually scan for since I'm a nwb in every sense of the word. I push 200 shares of GOOG w/o a prob and compound the returns. GOOG is not even a high beta stock which is where one could really get into some killer trend action. OT therer. In any event, the High/Low of the bar is still exactly the same, the only altered data is the open/close which is what traders tend to act at anyway assuming there beating the masses. I presume this is what can make minute charts for some symbols so chaotic. My rationale for fixing my setup was as follow. I was fearfully entering the markets using 5 min charts and getting whipsawed whether trend or no trend, when I debriefed what went wrong, I noticed that I was doubting my reasons for entering because of these darn colors. I knew from reading countless posts that PV had to be evident. So I jumped over to variable time charts as depicted by tick bars. Treated the bars like lenses by zooming in and out (incr/decr num of tick/bar) until my indicators synched, I could also do the reverse (adjust indicator settings until they synch with the data). Now volume trends were working but the bar colors were chaotic, like playing red light green light, and still left me fearful and hesitant. This lead me to believe that open close datapoint itself is being too heavily weighted, so I rectified it with the Heikin-Ashi thing. I only use the Heikin-Ashi thing to clean the screen up. Where does it fail, when you zoom in so close to the T&S action such that one is on a tick execution level. At that point, I believe one only need two things, Level 2 & T&S with bid/ask trade differentiation (accumulation/distribution). I'm not expert on this but where else would one look. I've posted my setup somewhere in the medved thread. But Yes, I do trade using the feature. However, it's only so that I can more easily believe what I see and trade what I believe. When I become more proficient, I'll just disable the colors and the feature and stay on the "cleaner" chart. That's the killer...
He doesn't. All reversal traders make their profits by holding during trends. However, this has nothing to do with trend *following*. Trend followers do not trade the entire trend - rather they trade the part of the trend that occurs *after* the trend has become clear. They then exit *after* it is "obvious" that the trend has ended. It is quite possible that the majority of trends occur before they are obvious, and that reversals before a trend-end becomes obvious are sufficiently large that trying to trend-follow is ultimately marginally profitable, or even loss-making. The idea that because trends exist, following them must inherently be profitable, is one of the most absurd and logically fallacious arguments in the markets
Reversal traders are of the opinion that, once a trend has become clear, the majority of it is likely to have already taken place. Trend-followers think that once a trend is clear, there is plenty more to go, and that they will not then subsequently lose those further profits before identifying that a correction has turned into a reversal. Each is correct at times, neither is correct at all times; in fact, at times both are catastrophically wrong.
Well, from what you have been saying on this thread, you have been attacking trading strategies on the purely theoretical grounds of market efficiency. However, if you accept that markets are not perfectly efficient, then there is NO general theoretical argument whatsoever against any trading strategy at all. Therefore your entirely theory-based claims lose all their validity. You can't say "TA is BS because markets are efficient", then admit markets are not really efficient, and still stick to your claim based on your now-invalidated premise. This is the sort of naive undergrad logically fallacious economically illiterate BS that Malkiel has indulged in for his entire career.
A perfectly efficient market means that no trading strategy can make above average profits. A less than perfectly efficient market (even if it is still 99.99% efficienty) means that *any* strategy at all can, in theory, make superior profits. The assessment of any strategy at all, even financial astrology or dart-throwing, is then taken entirely out of the realm of theory, and becomes purely a matter of assessing the likely edge involved given real world-conditions, versus competition for that edge.
Therefore your entirely theoretical objections to simplistic TA such as trend-following become obsolete. There are no theoretical objections to TA in a less than perfectly efficient market. The only objections are practical - i.e. that the most knowledgeable, well capitalised, and efficient competitors are likely to discover and effectively implement any value-adding TA better than your average trader. But one can then bring in advantages to the smaller trader, such as focusing on secondary markets which are too small for instutitions to bother with, or looking at permanent institutional biases, such as having to cater to the naive biases and errors of their customers (think mutual funds having to sell at the bottom of financial panics due to investor withdrawals, even though the fund manager might be a raging bull). It now becomes a matter of empirical testing - theoretical arguments become nothing more than suggestions for where one might test most productively.
well said.
It doesn't accomplish much for you to put so much weight on an argument about the imperfection of efficiency theory.
No model has "perfection" on either side, regarding the functioning of the market or one's method of approach.
It's a red herring issue that no serious model builder would worry about.