Quote from timewarner2:
NO !! Trends do not change.
Trend Following replies:
But Market conditions do
Trend-following is a great system, no doubt, but it is not the only one that makes money. It does work when Markets trend. ( Right now,for example it's making me a nice profit in Gold futures.) But no less a trader than Paul Tudor Jones says that markets trend only 15% or the time, and the rest of the time they move sideways. (Schwager Market Wizards,
p 149) He goes on to add (p 135) that of all the systems he's tested, trend-following does (or did - he had only been trading it for six months when he was interviewed in 1989).
The percentage Paul Tudor Jones quotes varies (see below) but whatever numbers are used the point is valid - trend-following is not the best method for all market conditions.
He also adds (remember, this is 30 years ago) that he uses his own version of trend-following primarily as a back-up, to tell him when to get out of the market (p 144) and that it serves a purpose, even if used temporarily, for new traders to learn how to use discipline and develop risk management (p 145)
Is Jones for real? For more on this billionaire, see
Personally, I like what Van Tharp has to say about developing not just one system to fit all market conditions, which is difficult, but to have at least three well-developed systems for various markets.
Here's a quick take from his book Super Trader
, 2009: I like this idea of having different strategies for six market conditions 1. sideways stable, 2. sideways volatile, 3-4. bullish stable and volatile, 5-6. bearish stable and volatile. Tharp uses a 13-week window back-tested to 1950 - if the average change is less than 5.53% either way, he considers this a sideways market, great either way, bullish or bearish market condition. To measure volatility, he uses a 13-week ATR for the same period. Less that 2.87% ATR = quiet market, greater = volatile. Over the past 58 years, 41.35% of the time the Market is volatile, 11.91% it is bearish, 58.29% sideways, and 29.8% bullish. Curtis Faith (if you will pardon me!) makes similar points in his books.
If you have only one trading system, then Trend-Following is certainly a very good choice. However, others do well in different market climates. And it just makes more sense, IMHO, to have more than just one trading system.
I don't mean to rile the folks here who are fanatical about their system, and poo-poo all others - hardcore goldbugs, religious zealots, and certain Mac users are like this. But I feel there's plenty of room for a variety of methods. All work well, depending on the market conditions, the user's personality, and trader discipline.
By way of introduction. I do not usually speak up in forums. I'm still a new trader, and newer to this particular forum, but I have picked up a few things over the past 60 years and I don't mind speaking my mind. Maybe I am wrong about all this. If so, show me, and I will be grateful. I can take the charge at home plate with the best of them, but I do not like the childish tit-for-tat that passes for discussion in too many of these blogs. If all you have is the ad hominum
crap and disrespect, if you want to indulge in pointless flame-wars, if you always need to be right, then I won't waste my time. We are supposedly here to help each other, I think - correct?