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Trend Following-Trend Commandments

Discussion in 'Events' started by Trend Following, Jun 22, 2011.

Trend Following Sponsor
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David Cheval
Michael Gibbons

Both new episodes on the podcast:

http://itunes.apple.com/us/podcast/trend-following-manifesto/id151217747

Michael Covel is the author of five books including the international bestseller, "Trend Following" and his investigative narrative, "The Complete TurtleTrader". His Trend Following podcast has generated 3M listens. Also: Receive Free DVD.

#481 Aug 22, 2012

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bigarrow
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An interview with Chick Goslin would be good.
I enjoy the podcasts by the way.

#482 Aug 23, 2012

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Trend Following Sponsor
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Thanks for the feedback. Glad you enjoy.

Michael Covel is the author of five books including the international bestseller, "Trend Following" and his investigative narrative, "The Complete TurtleTrader". His Trend Following podcast has generated 3M listens. Also: Receive Free DVD.

#483 Aug 23, 2012

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tandy777
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it is too long for reading make it simple

#484 Aug 24, 2012

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Thanks for the feedback, but what did you exactly prove??

Quote from Tango 6 Alpha:

I'm sorry I missed this one!

The title of the thread had a catchy ring to it (Trend Commandments) that was to irresistible to ignore. Obviously, created by a creative mind. Unfortunately, had I been here when this thread kicked-off, I would have had to play the role of contrarian.

The question was asked by someone in this thread long ago: Can anyone give a definition to the trend?

The answer is a resounding yes. People often times provide their own definitions for things that have no physical extension into the universe in which we live. The mere fact that one can provide their definition, does not give existence to the thing they define. Therefore, the technical (mathematical) answer to the question is all at once a resounding no.

Market Trends, in fact, do not exist. What's more - they never have existed. They are a figment of the observers imagination. No more real than the Tooth Fairy. Yet, that does not stop the belief in the Tooth Fairy, from impacting the lives of millions of little children on an annual basis. Likewise, the irrational and illogical belief that one can actually "trade the trend," becomes self fulfilling prophecy in the markets on a daily basis, and is the causation that has significant meaning for all traders within all time frames. This recalcitrant irony is one of the wonders of the world, as far as I am concern.

Now, to the matter of trends.

The question of whether or not the trend exists, goes much deeper than the superficial definitions easily given by simply looking at a chart, observing the historical price and making a declaration about the "trend" based solely upon the path that price took to arrive at its present level. This is and always has been the accepted norm for determining not only whether the trend exists, but its direction as well. However, a closer examination of the logical characteristics of price and of the existence of Time itself, will reveal that while history does like to repeat itself, that path it takes to its repetitious behavior indeed has nothing whatsoever to do with trends.

Case in point. The conventional trend is defined by selecting a directional path for price, that is established with the linear relationship between multiple price points through history, for 'X' number of bars of data. A linear line is then drawn connecting the Present price point, to some price point in the Past.

All other relative price points found inside each bar of data (OHLC) between the Present and the Past, are excluded from the equation and thus deemed marginally important at best for the purpose of providing a linear definition for the trend. Historically, this has always been the classic manner in which the trend's existence was defined, quantified and measured. And, it has been from such information that traders since the down of price charts, have been making entry and exist decisions with respect to their position in the market.

This trader's behavior is hallucinogenic to the core.

The trader hallucinate that a linear regressive relationship in the historical price, is in fact something that can be traded in the Present and continued in the Future. The fact that the market helps the trader to become even more hallucinogenic, by often times rewarding the trader for taking a position based on this irrational assumption, is nothing short of a cruelty defined. Downright evil in some instances. Yes, the market can be evil at times and its feigning of the existence of trends, is one of hits hallmark evil traits. So, why is this market behavior so cruel?

Go back to the historically accepted definition of a trend given above an recall what was left out of the equation: the internal price points between the both the Past and the Present price points that were used to both define and quantify the trend. These internal OHLC price points, had they also been used in the calculation, would have nullified the possibility of there ever being a linear definition for the trend that was mathematically possible. Boom! Just like that, you eliminate the existence of the Linear Trend without even breaking a sweat.

Now, rest assured that this reality is not merely some kind of mathematical street magic. Its simply a mathematical fact born of the logical relationship between that which is Linear and that which is Non-Linear. So, mathematically - in any market that contains historical OHLC, there can NEVER be any rational definition of a Trend. Period.

Ok, so much for the math theory - let's get down to the physics of trends shall we. Recall, that above I implied that "Time" had something to do with "trends." Well, its true. But, you are going to have to hold on to your hat for just a moment as this ride might get a little unfamiliar to some.

The question is whether or not trends actually exist. My answer is absolutely not, trends do not exist. However, my extended answer is not merely that my opinion is that they do not exist, but rather that it is physically impossible to declare that a trader could actually trade a trend. You'll have to bear with me on this.

In order for the trade to trade something, that thing must have a point of instantiation in reality. That simply means that the trend must have some kind of tangible existence that can quantified, or measured. Else, the trader is simply making it up in their own mind (which is a well understood and highly used practice among many traders in all markets). If the trend does not exist, the trader cannot trade it.

Looking back at our historically accepted example once again, we come to the realization that at some point, the trader has not only make a determination about where the trend resides, but what direction the trend is pointing. Well, THAT is the problem. The problem is two fold:

A) The trend has no possible way of extending itself beyond the current bar of data (the Present).

B) In order to trade the trend, the trend must exist.

There is a huge problem here for so-called Trend Traders. That problem is not only mathematical and philosophical, but it is also a very difficult logical and physical problem, neither of which have any real good potential for a solution.

The "trend" must (by definition) be composed of events that have already had their respective points of instantiation. The instantiation of any market event comes with a time stamp that marks it place in history, and locks it down as something that can never be altered or changed.

The most important aspect here, is that the market event must exist somewhere in history. And, while individual historical price points (bars of data) may indeed be linked together linearly across Time, there are no such linkages physically possible in the current bar of data, as the physical component of price cannot be extend beyond the Present. Thus, if you remove "Time" from the equation, all prices collapse into a singular vertical dimension with no horizontal expansion through history. Thus, once again, no Linear Trend is possible.

So, what is possible?

Re-introduce "Time" and you can clearly see that the only possible thing the trader can ever trade is: The Time Based Trend Projection and NEVER (ever) the trend itself.

The only price related vectors that truly exist in the market are called: Trajectories. Trajectories are a much more comprehensive method for determining the true nature of price stability relative to its Direction. Trajectories also uncover and reveal information previously hidden from market observers about the true nature of the Magnitude of price. Trajectories are also very useful in providing previously hidden information about the Timing of price action. And, lastly, trajectories are most notably significant for their ability to dynamically identify the structure of price behavior over time.

With this understanding, the trader has a much broader and far deeper understanding of price behavior and the structure of price that contains such behavior. And, with that knowledge, the trade can make far more precise measurements on the Future location of price within its own structure.

I hope this has been somewhat helpful, especially to the new traders out there who are just beginning to dig into and study the nature of price.

Until next time!

StealthTrader
More...

Michael Covel is the author of five books including the international bestseller, "Trend Following" and his investigative narrative, "The Complete TurtleTrader". His Trend Following podcast has generated 3M listens. Also: Receive Free DVD.

#485 Aug 24, 2012

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WS_MJH
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Quote from Trend Following:
More...

I enjoyed all of your books, Michael. Glad that you wrote them and Trend Following was especially good. Kudos.

#486 Aug 24, 2012

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jack hershey
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Quote from Tango 6 Alpha:

I'm sorry I missed this one!

The title of the thread had a catchy ring to it (Trend Commandments) that was to irresistible to ignore. Obviously, created by a creative mind. Unfortunately, had I been here when this thread kicked-off, I would have had to play the role of contrarian.

The question was asked by someone in this thread long ago: Can anyone give a definition to the trend?

The answer is a resounding yes. People often times provide their own definitions for things that have no physical extension into the universe in which we live. The mere fact that one can provide their definition, does not give existence to the thing they define. Therefore, the technical (mathematical) answer to the question is all at once a resounding no.

Market Trends, in fact, do not exist. What's more - they never have existed. They are a figment of the observers imagination. No more real than the Tooth Fairy. Yet, that does not stop the belief in the Tooth Fairy, from impacting the lives of millions of little children on an annual basis. Likewise, the irrational and illogical belief that one can actually "trade the trend," becomes self fulfilling prophecy in the markets on a daily basis, and is the causation that has significant meaning for all traders within all time frames. This recalcitrant irony is one of the wonders of the world, as far as I am concern.

Now, to the matter of trends.

The question of whether or not the trend exists, goes much deeper than the superficial definitions easily given by simply looking at a chart, observing the historical price and making a declaration about the "trend" based solely upon the path that price took to arrive at its present level. This is and always has been the accepted norm for determining not only whether the trend exists, but its direction as well. However, a closer examination of the logical characteristics of price and of the existence of Time itself, will reveal that while history does like to repeat itself, that path it takes to its repetitious behavior indeed has nothing whatsoever to do with trends.

Case in point. The conventional trend is defined by selecting a directional path for price, that is established with the linear relationship between multiple price points through history, for 'X' number of bars of data. A linear line is then drawn connecting the Present price point, to some price point in the Past.

All other relative price points found inside each bar of data (OHLC) between the Present and the Past, are excluded from the equation and thus deemed marginally important at best for the purpose of providing a linear definition for the trend. Historically, this has always been the classic manner in which the trend's existence was defined, quantified and measured. And, it has been from such information that traders since the down of price charts, have been making entry and exist decisions with respect to their position in the market.

This trader's behavior is hallucinogenic to the core.

The trader hallucinate that a linear regressive relationship in the historical price, is in fact something that can be traded in the Present and continued in the Future. The fact that the market helps the trader to become even more hallucinogenic, by often times rewarding the trader for taking a position based on this irrational assumption, is nothing short of a cruelty defined. Downright evil in some instances. Yes, the market can be evil at times and its feigning of the existence of trends, is one of hits hallmark evil traits. So, why is this market behavior so cruel?

Go back to the historically accepted definition of a trend given above an recall what was left out of the equation: the internal price points between the both the Past and the Present price points that were used to both define and quantify the trend. These internal OHLC price points, had they also been used in the calculation, would have nullified the possibility of there ever being a linear definition for the trend that was mathematically possible. Boom! Just like that, you eliminate the existence of the Linear Trend without even breaking a sweat.

Now, rest assured that this reality is not merely some kind of mathematical street magic. Its simply a mathematical fact born of the logical relationship between that which is Linear and that which is Non-Linear. So, mathematically - in any market that contains historical OHLC, there can NEVER be any rational definition of a Trend. Period.

Ok, so much for the math theory - let's get down to the physics of trends shall we. Recall, that above I implied that "Time" had something to do with "trends." Well, its true. But, you are going to have to hold on to your hat for just a moment as this ride might get a little unfamiliar to some.

The question is whether or not trends actually exist. My answer is absolutely not, trends do not exist. However, my extended answer is not merely that my opinion is that they do not exist, but rather that it is physically impossible to declare that a trader could actually trade a trend. You'll have to bear with me on this.

In order for the trade to trade something, that thing must have a point of instantiation in reality. That simply means that the trend must have some kind of tangible existence that can quantified, or measured. Else, the trader is simply making it up in their own mind (which is a well understood and highly used practice among many traders in all markets). If the trend does not exist, the trader cannot trade it.

Looking back at our historically accepted example once again, we come to the realization that at some point, the trader has not only make a determination about where the trend resides, but what direction the trend is pointing. Well, THAT is the problem. The problem is two fold:

A) The trend has no possible way of extending itself beyond the current bar of data (the Present).

B) In order to trade the trend, the trend must exist.

There is a huge problem here for so-called Trend Traders. That problem is not only mathematical and philosophical, but it is also a very difficult logical and physical problem, neither of which have any real good potential for a solution.

The "trend" must (by definition) be composed of events that have already had their respective points of instantiation. The instantiation of any market event comes with a time stamp that marks it place in history, and locks it down as something that can never be altered or changed.

The most important aspect here, is that the market event must exist somewhere in history. And, while individual historical price points (bars of data) may indeed be linked together linearly across Time, there are no such linkages physically possible in the current bar of data, as the physical component of price cannot be extend beyond the Present. Thus, if you remove "Time" from the equation, all prices collapse into a singular vertical dimension with no horizontal expansion through history. Thus, once again, no Linear Trend is possible.

So, what is possible?

Re-introduce "Time" and you can clearly see that the only possible thing the trader can ever trade is: The Time Based Trend Projection and NEVER (ever) the trend itself.

The only price related vectors that truly exist in the market are called: Trajectories. Trajectories are a much more comprehensive method for determining the true nature of price stability relative to its Direction. Trajectories also uncover and reveal information previously hidden from market observers about the true nature of the Magnitude of price. Trajectories are also very useful in providing previously hidden information about the Timing of price action. And, lastly, trajectories are most notably significant for their ability to dynamically identify the structure of price behavior over time.

With this understanding, the trader has a much broader and far deeper understanding of price behavior and the structure of price that contains such behavior. And, with that knowledge, the trade can make far more precise measurements on the Future location of price within its own structure.

I hope this has been somewhat helpful, especially to the new traders out there who are just beginning to dig into and study the nature of price.

Until next time!

StealthTrader
More...

This was an approach used since 1957.

The Parametric Measure of our HS has always been a binary vector.

The results are posted broadly.

No one "follows trends"; thrends are monitored and analyzed.

All the events of a trend can be defined.

When all of these are measured and ar false, then a trend ends.

A person has to use fintie math and OHLC are not part of fintie math. Events in the forwarding of the trend are all that matters.

It is precise, without flaw and there are no anomalies.

you have a long way to go .

#487 Aug 24, 2012

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Trend Following Sponsor
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Quote from WS_MJH:

I enjoyed all of your books, Michael. Glad that you wrote them and Trend Following was especially good. Kudos.
More...

Thanks.

Michael Covel is the author of five books including the international bestseller, "Trend Following" and his investigative narrative, "The Complete TurtleTrader". His Trend Following podcast has generated 3M listens. Also: Receive Free DVD.

#488 Aug 24, 2012

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jack hershey
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Quote from Tango 6 Alpha:

1) I clearly showed why "trends" are a figment of your imagination.

2) I showed that mathematically its impossible to define a Linear Trend, when/if the historical data set is series based and it contains multiple dissimilar data points (OHLC) occurring at different times within a segmented range of time.

3) I showed the physical impossibility of ever trading a trend, by showing that no trend can ever be physically extended beyond the current bar (Present).

The "trend's" very definition is rooted in that which has already taken place AND can never be extended through Time, from the past, to the present and then into the future.

You are not trading the trend. That's both physically and logically impossible. You can only trade a Projection. In my original post, I added the word "Trend" to Projection and called it the Trend Projection.

I did that not because it is accurate, but because in dealing with occultists who actually believe in fallacy, you sometimes have to slowly bring them out, by including language that they can understand - just so they can arrive at a better (more precise) understanding of their error.

Think of it as inoculation in reverse.

It wouldn't be "StealthTrading," if it were easily detected. Would it? Nor, would I be a "StealthTrader," if trends truly existed. Would I?

The Trajectory does a lot more than merely change the language used to describe the behavior of price. It actually unlocks a door that's been closed hidden from traders since the dawn of financially traded markets. What I've discovered, is something that I've never seen anyone discuss anywhere within the past 10 years that I've been developing it. If someone else knows about it and has been developing it inline with me, then they have been doing it in complete and total privacy, without ever speaking, or writing about it in public.
More...

Taking the full offer of the market is simple and follows a logically deduced process.

Tinme is replaced with events and there are four keys to a market's operation. All stem from market granularity.

An ATS is used to make it more easily possible to do the "taking".

An expert skilled and knowledgeable trader ALWAYS knows befoe the trade that it is there and it moves from the future into the present and the trade happens.

You may still be at a learning point where you do entry/exit trading. Taking the full offer of the market is done with hold/reversal trading. It is all based on the Order Of Events of the trend's defined data categories which lead price.

You are working with the incorrect valiable so far. Too bad.

#489 Aug 24, 2012

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Trend following is just a name. This style of trading, whatever you call it, answers these questions:

1. What market do you buy or sell at any time?
2. How much of a market do you buy or sell at any time?
3. When do you buy or sell a market?
4. When do you get out of a losing position?
5. When do you get out of a winning position?

Said another way:

1. What is the state of the market?
2. What is the volatility of the market?
3. What is the equity being traded?
4. What is the system or the trading orientation?
5. What is the risk aversion of the trader or client?

The other stuff, the other dramas you cite, don't play a role.

Mike

Quote from Tango 6 Alpha:

1) I clearly showed why "trends" are a figment of your imagination.

2) I showed that mathematically its impossible to define a Linear Trend, when/if the historical data set is series based and it contains multiple dissimilar data points (OHLC) occurring at different times within a segmented range of time.

3) I showed the physical impossibility of ever trading a trend, by showing that no trend can ever be physically extended beyond the current bar (Present).

The "trend's" very definition is rooted in that which has already taken place AND can never be extended through Time, from the past, to the present and then into the future.

You are not trading the trend. That's both physically and logically impossible. You can only trade a Projection. In my original post, I added the word "Trend" to Projection and called it the Trend Projection.

I did that not because it is accurate, but because in dealing with occultists who actually believe in fallacy, you sometimes have to slowly bring them out, by including language that they can understand - just so they can arrive at a better (more precise) understanding of their error.

Think of it as inoculation in reverse.

It wouldn't be "StealthTrading," if it were easily detected. Would it? Nor, would I be a "StealthTrader," if trends truly existed. Would I?

The Trajectory does a lot more than merely change the language used to describe the behavior of price. It actually unlocks a door that's been closed hidden from traders since the dawn of financially traded markets. What I've discovered, is something that I've never seen anyone discuss anywhere within the past 10 years that I've been developing it. If someone else knows about it and has been developing it inline with me, then they have been doing it in complete and total privacy, without ever speaking, or writing about it in public.
More...

Michael Covel is the author of five books including the international bestseller, "Trend Following" and his investigative narrative, "The Complete TurtleTrader". His Trend Following podcast has generated 3M listens. Also: Receive Free DVD.

#490 Aug 24, 2012

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