Good regime for trend-following and mean-reverting strategies?

start with the simplest example and break it down,i had the computer draw the 50% line,amazing how many times it was s/r

 

Mike, I was talking about the autocorrelation of the price series not the vol series.

And you went even more extreme - you are saying that any promising system has source of returns driving by VOL.

On the other hand, I agree with you, if vol is a purified tradable time series, we can devise MR trading strategies on vol (this is a different trading strategy than trading based on price series, but it's an interesting deviation brought up by Mike). But I guess trading MR on vol is too hard to do?

 

I agree with your observations.

But I've also read literature saying that a large vol is good for trend-following ... strange.

 

Thank you for your hints! :=)

 

Why? Option Expiration Date?

 

What do you mean? I hope I am also contributing by asking questions.

Lets take this particular thread as an example - as you can see, I have read lots of literature on trend-following and mean-reverting...and I have read conflicting statements. And I don't agree with people using vol to define regimes... I laid out the background info and my confusion in my question and I was inviting thoughtful discussions on these matters. Moreover, I was inviting thoughtful discussions about what are precisely the "trend-following" systems and "mean-reverting" systems... and why is "vol" involved here ... This is not only my own confusions, my own questions, my own learning processes, but can also serve as a reference thread for other learners... Essentially I am like a journalist or the Tom on Bloomberg interviews... Had I not entered the trading field, I probably will do a journalist career... :=) And you are saying that I don't make any contributions?

 

miz,r u familiar with market profile,heres a 1 day pattern,the widest spot on the right is the mean

 

here are multiple sets of that pattern stacked,

 

Wow, you are relating "trend-following" and "mean-reverting" to market profiling? Welcome! We always welcome new ideas and new perspectives!

I've heard about the name, but never used it. I have downloaded your plot - how shall I make sense of it?

Thanks a lot!

 

Points well taken Bone!

As you can see - I am asking some "deep" questions - I know you are against "generalization" for this matter... as you said, "generalization" is dangerous. But I cannot seem to clear my mind:

During 2008-2009, the vols were huge. Yet the best performing funds during that period were the CTAs (mostly trend-following I guess) ... how do you reconcile these?