If we assume that there was no indication of trends in equity markets in the past as you say, should I conclude that there will be none in the future too? Would you put money on that idea Surf?
A group I am affiliated with is constantly looking for exploitable edges in the stock market. I'll quote my mentor: "Any trend that exists can be quantified and its departure from randomness can be measured with the usual statistical procedures, such as confidence intervals and likelihoods. Serial correlation coefficients, regression coefficients of current changes versus past changes, and magnitudes of the impact of past moving averages on the future, distributions of the length of runs, the correllelogram, the expected waiting times between peaks and valleys, survival statistics. All these techniques are very good at discovering any non-random elements. To join a proper debate, such measures must be quantified for various markets and various times, and the degree of uncertainty and departure from randomness must be ascertained. I have never found a movement in prices that anyone could make money with by a trend following method that didn’t also show a major departure from randomness revealed by the standard statistical measures I mentioned. The tragedy is the mysticism and blind acceptance of trendism, that trend following exponents proclaim, without any evidence as to magnitude and uncertainty. No self-reported results that selected individuals or leaders might have made in the past shed light on the debate."
see above, we run these tests often--- what are your tests based on? Let me guess, you made money last week?? surf
no, i lost money last week. i have employed statistical tests in the past and found trends in the stock market quite easily. It helps to define trends first. Your mentor's (i assume vic niederhoffer)'s one time boss, George Soros also believes there are trends in the stock market (source: soros on soros, alchemy of finance, various interviews). I have debated stuff with your mentor (or his assistants) about misleading stuff on his website, i have commented on that on this forum (you'll have to search for it, i cba to repeat it). To say i don't have much of a high opinion of VN would be an understatement.
Ok, good to hear, we are always open to a challenge. Can you post just one of the tests that you have used that indicate trends in the stock market-- taking into account the inherent upward drift. Thanks, surf
Further more, my mentor who has a PhD in stats from the University of Chicago, taught the subject at Berkeley, and has earned nearly a billion $$ in the financial markets as a practioner states--- "These tests can readily be performed. My group of colleagues performs these tests maybe 2-3 thousand times a year over different markets and time frames. Those of a cognitive bent and those with their feet on the ground are always open to the existence of trends, but they test them with the best statistical methods existing. If you apply these tests to stock market moves, you will find that all such tests show negative serial correlation. In fact, they indicate a tendency for reversal."
Isn't this just a recognition of the "sawtooth" patterns in all trading? Market Makers drive prices up, retail players BUY, and then MM drives them down, retail players SELL. Retail players are fundamentally "chasers" of price, or "riders of trend". This fundamental sawtooth pattern, which is no doubt "fractal" on all timeframes would suggest, in simple terms, that "The trend is your friend, but not for much longer." This is how MM increases her "take" across the spread, by creating "micro chasing" scenarios in the retail population which is attempting to find and to ride a "trend". Naturally, this "fractal nature" means that the "supertrend" may continue, while the lower timeframe trends will oscillate more frequently, as most traders realize. Whipsaw, which most traders experience, is the result of micro trend chasing, and the observed reversals. Over-trading is of course, being too susceptible to being "whipsawed" in an attempt to find and to ride a "trend". HyperScalper