My good god, I'm loading the max number of replies per page and this is the 62nd page. It's not a thread, it's a Dickens novel, w/almost as many plots and characters, though unfortunately not nearly as interesting. Why/how would any serious chartist/trader, novice or experienced, successful or struggling to be so, take the premise of the original post as any thing other than silly? Unless you're trading options or scalping (of which I know little, but they seem to be different animals), how can trading by a chart exist w/o trend? What is a chart but a depiction of the volatility cycle in an auction market, from low vol to high vol and back to low, consolidation to trend to consolidation and so on, ad infinitum, w/in all timeframes in a fractal market, as supply and demand constantly seek balance but inevitably over-compensate? Trend is inherent to an auction market, as is consolidation, they are its yin & yang. If one doesn't exist then neither does the other, and if neither, then supply & demand is a bogus concept and the market is the real myth. In which case we can all go home now and become accountants or apply to Burger King. Next thread, in the Options forum - "Consolidation Myth Shattered! Price Never Really Goes Sideways! (And It doesn't Go Up or Down Either, BTW! So there!)" I don't really get the point of the original post and link. So, mechanical trend-following systems you buy don't work? Trend-following funds don't work? Yeah, so? If they were the magic bullet, why would we all be working so hard to find our own way when we could leave it to someone else, or at worst, make our own trades by following the bright green arrows? Next profound observation: Wize-Trade is a sham! Discuss for a year. The original premise is just smoke and mirrors. "Even the heroes can't seem to do it..." What Heroes? To whom? Guffaw! H
Questions: What securities did you backtest? What moving averages did you use? What time period? (last 3 months, last 12 months, 5yrs) What time frame? (5 min, hourly, daily) What was the gain and/or Sharpe Ratio? If you post the securities you used, I can check them out to see if there's a trending system that might work for you.
I tested some stock indices, like the sp500, nasdaq, iwm, using either long term moving average (long term >= 200 days ) or 20-day averages for over 10 years. The Sharpe ratios are good (about 1.00 to 1.30) for some indices except the sp500. There is nothing fancy, and the results are well documented in the literature. Still, the question is whether the simple trending methods will work in the future, and I have serious doubts about this. I mentioned Zweig because it seems to be an example that past success does not imply future success. His indicators (especially the prime rate indicator) worked great in 80's but stopped working lately.
Do you also cut profits and let losses ride? Don Quichotte also thought to be a trend leader, but without followers there can be no trend...
So, it is well documented that trend trading works for some securities, right? And this has been documented over 10 years, right? I don't think there's any guarantees in this business. That said, what's your basis for your serious doubts about trend trading? I disagree with your statement that "past success does not imply future success." Of course it does! Past success is the entire basis for any trading strategy, trending or otherwise! It's the only thing we have to go on, and in this case we have ten years' worth of data. But you can't confuse expectation (or implication) with guarantee. Example (humorous): It is an undeniable fact that I am in no position to guarantee to anyone that the sun will rise tomorrow. However, I have a positive expectation that the sun will rise, and I will plan my day accordingly... I would argue that trend trading is more stable than other strategies because it's based strictly on price. If the price trend is down, you don't own the security. Simple as that. Last point. Try trading IWN with a 34/8 exponential moving average crossover. Five year annual return is over 20%. Simple, yet effective.
the problem is trend following is a flawed premise. regardless of what "seems" to be correct---it is not---- as evidenced in the wildly disparent results of the so called trend followers. hank
Hank, is there a trading system that does not result in wildly disparate results of traders using it? As I said before, some securities trade well with trends, some don't. You have to pick your battles, and the way to do it is to backtest your strategy. For example, I will never trend trade SPY, because every backtest I've ever done on it is terrible---it's too volatile and doesn't have good "day-to-day serial correlation", i.e., it doesn't have trends long enought to make a profit. What is the flaw, then?
would you mind sharing several securities that trend trade nicely? i am open to new workable ideas. thanks !