Does trend following have an edge?

Discussion in 'Technical Analysis' started by Visaria, Sep 7, 2010.

  1. If in a coin toss the coin is not absolutely fair, which is never but only in theory, then you can exploit that. Do some reading before you object to well-known facts:

    "In the early 1990s, Gonzalo Garcia-Pelayo believed that casino roulette wheels were not perfectly random, and that by recording the results and analysing them with a computer, he could gain an edge on the house by predicting that certain numbers were more likely to occur next than the 1-in-36 odds offered by the house suggested. This he did at the Casino de Madrid in Madrid, Spain, winning 600,000 euros in a single day, and one million euros in total. Legal action against him by the casino was unsuccessful, it being ruled that the casino should fix its wheel."

    http://en.wikipedia.org/wiki/Roulette#Biased_wheels

    There can be no true randomness. Listen to this carefully. The world is biased due to initial conditions (thermodynamic arrow of time, entropy, etc.). True randomness is a thought experiment.
     
    #41     Sep 7, 2010
  2. Math illiterates always laugh than solving the problem.
     
    #42     Sep 7, 2010
  3. I'm not asking whether there is true randomness in anything physical, that's silly. I'm asking how one can get positive expectancy out of a truly random walk in theory.
     
    #43     Sep 7, 2010
  4. A good question to ask would be, "Is it possible to trade the trend profitably on an intra day basis"
     
    #44     Sep 7, 2010
  5. Why are you asking questions that have no answer or applicability? It is like asking you if you see a unicorn what it would be like trying to chase it.

    As a trader is should not be of concern to you "how one can get positive expectancy out of a truly random walk in theory". Markets are not pure random walks.
     
    #45     Sep 7, 2010
  6. I agree markets are not pure random walks, that's actually the reason why I am posting here.

    If you go back to my first post in this thread and follow them, you'll understand why I'm still on that topic.
     
    #46     Sep 7, 2010
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    #47     Sep 7, 2010
  8. Paul has his own system.
     
    #48     Sep 7, 2010
  9. Excellant question . . . . yes, but it a whole lot harder to extract consistent profit from it.
     
    #49     Sep 7, 2010
  10. Texasdj

    Texasdj


    No, therein lies the issue. first, if it can proven that trends don't exist in the stock market, what exactly are you trading?

    Furthermore, to other posters who mentioned the herd, sentiment and crowd psychology as to why "trend following" works--- your entire premise is faulty--- as is behavioral finance imho.

    It is not the herd, crowd, or group of participants that move the markets--- it is the density of money ( for lack of a better term )

    for example, the crowd may be 1000 strong, but one, solitary trader can control more capital than all 1000 of the crowd--therefore it matters not what the crowd or group does as its the money that moves the market regardless of how many or few control it---

    I just destroyed the entire premise of TA, trends, charts and behavioral finance---- book coming soon....:D :D :cool:
     
    #50     Sep 7, 2010