In a 2004 interview Niederhoffer predicted all the big trendfollowing funds (Dunn, AHL, Winton, Bluetrend) would blow up or "disappear" eventually. Because "their approach to trading is based on a fundamental misconception" -- according to Victor. Fast forward 11 years and it turns out Niederhoffer is the one who is gone, and the big trendfollowing funds are still here, still managing 100's of billions.
You ran your mouth proclaiming you "tested everything, but no mechanically testable trend following strategy worked". Then, when put to the point, you reveal you insist on rapid-fire, short term, high turnover systems and you never tested anything else. You fit right in on ET. Clueless clown making grand, universal statements.
Where did I write that I have not tested "everything"? Since 2000 I have tested a zillion strategies: any timeframe there is, be it 1 minute to 25 years, trend or mean reverting. What works best is relative short term strategies with a good edge and turn it over as many times as possible. Again, this is on stocks only.
Definitions are the big problem, and they can never be solved. So any meaningful discussion is impossible because of different interpretation of words. Definition can also change over time. 2 samples: My car can reach 200 mph. True because I drive a Lamborghini Aventador. Not true because I drive a 1940 Ford T My computer can calculate very complex formulas in less then a second. True because I have a Xeon E-2699 Not true because I have a 8088 cpu Each time, from their point of view, both are right.
If the nobodies, Its super funny hearing these "nobodies", 15 year old basement dwellers, third world dreamers, crank engineers, chefs, and ne'eerdowells argue and throw stones from behind aliases with very weak parroted ideas against known and experienced market participants. I asked one of the clowns to define a word and it left in a huff. Others point at the giant trend funds as "evidence". Can it get any worse? surf
Yes, read the postings from Marketsurfer. "Again a dodge. Shame on you Surf. No one can reason with you with this kind of attitude. Thank you for your time. Regards, Monoid."
Are you able to tell me how Eugene Fama defines momentum? Your friend Mono ran in fear and shame when I asked him. Must be fun to think you are anonymous! surf
This warrants a response. Let me try to provide more color so that my comment -- the way you define 'trend' (or 'momentum') could, in by-itself', be an 'edge' -- is a little more clear. In trend based strategies, there are two ways of looking at the problem: (a) Have a 'unique' definition of 'trend' and have a simple trading strategy around it; or, (b) Have a 'generalized' definition of 'trend' and have a 'unique' trading strategy around it. Unique Definition of Trend Lets take Fama/French 3-factor model as an example. By defining rate of return in terms of market cap and book-to-market ratio they provided a 'definition' for momentum. This definition is unique. Had they not revealed this to the world, this definition of momentum would have been their 'edge'. Like all other things in financial markets, when people start copying a strategy, the 'edge' disappears. So, one has to find a different 'definition' for momentum that would provided a sustainable 'edge'. This is where, in my opinion, all the work is. Generalized Definition of Trend A similar explanation can also be given for disappearance of 'edge' when 'momentum' (or trend) is defined based on price in terms of 'higher-highs' and 'lower-lows'. Hence, there needs to be some 'additional' input. I am deliberately being vague here. This 'input' could be part of trend definition, which would make the definition of trend 'unique'; or, the 'input' could be part of the trading strategy, which would make the trading strategy unique thereby providing an 'edge' -- statistical edge. Because of the two ways of looking at the problem, providing an overarching comprehensive definition of trend is quite impossible. Herein lies the problem for a meaningful debate based on semantics. Unlike momentum strategies, in a mean-reverting strategy where one is 'playing' co-integrated pairs, the 'idea' itself is not important 'cos these strategies are not impacted by liquidity and positioning issues -- in other words, liquidity and positioning are very important issues to contend with in momentum strategies, where as, they are non-issues for mean-reverting strategies. Because of this, ideas of mean-reverting strategies, even when exposed, continue to work. When people understand this, they will know why 'trend-followers' don't reveal their strategies to others to test! I would love to continue to discuss this issue should you be interested, but lets get out of this thread! As a side note (not that it concerns you): there are some posts here which confuse 'mean-reversion' and 'counter-trend' trading. I hope they understand that for one to trade 'counter-trend', one has to first define 'trend'. It is just that those 'counter-trend' traders are betting of the "wind to die down after the kite is in motion" where as the 'trend' traders are betting that the "wind will continue after the kite is in motion". Debating which one is better is just silly! Regards, Monoid.
This is completely wrong. You might be confusing FF-3 with Carhart-4... The Carhart four-factor model is an extension of the Fama–French three-factor model including a momentum factor... If FF-3 already encapsulated momentum, there'd be no need for Carhart's augmentation.
Reread what I said without jumping into conclusions about the word 'momentum'. I am not talking about 'momentum factor' enhancements.