Is the larger time frame overrated?

Absolutely.

Give a computer 5000 bars and it will start generating trading signals according to the system's rules.

And yet the computer has no idea if the bars you fed it with are minute bars or daily bars.

 

Ah, bar-by-bar stuff. I confess complete ignorance. Carry on.

 

Just because the computer can't tell the difference, that doesn't mean there isn't a real difference in performance. No way of knowing until the performances are actually measured and compared.

 

It has been measured and compared, just not shared very openly.

 

What makes you think that performance will somehow deteriorate on the smaller time frames, assuming the trading rules stay the same?

What if the opposite was true?

 

You've confused me with Visaria. I was just concerned with how the comparison was done.

 

Ok, let's say I buy XYZ stock when the price is above the 20 and 50 period simple moving average (and vice versa for short). Then I liquidate my position when 2 consecutive bars close completely below (or above for short positions) the 50 moving average.

As you can see a very simple trend following system.

Here is the question: do you think this system will make less money if applied to the smaller time frames versus the higher time frames, assuming the percentage of trading capital allocated to each trade is the same in both cases?

 

How did you reach that conclusion? 1819.25 is BELOW 1820, not equal to it and NOT above it! It would be good to know when you would sell, so we can have an idea about what would happen to the guy who would buy from you.

I found your post funny.

If the market goes up say above 1840, I would not be surprised that some ETers would show up to say, with hindsight, that they bought at 1820 or any other number with a good profit.

 

**crickets**


RN

 

Just my experience. Obviously you will have more trades in a given time period trading on smaller time frames, but the risk/reward will be far less due to the impact of cost on smaller targets (already discussed), more slippage and gaps, more chance of error in execution due to less time to think etc. Overall, you might make more money, but your hourly rate will be less.

Your taxi cab analogy isn't apt here for that reason. The cabbie hikes up his fare for short journeys simply by having a minimum spend! You could go one street away and it will cost a minimum of 5 quid!