Profitaker
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Trading with the trend has a 50/50 chance of being profitable. Counter-trend trading has (you guessed it !) a 50/50 chance of being profitable.
TheBramble
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How are you calculating those probabilities Profitaker? They don't appear to fit within my experience of trading trends.
new_trader
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How long has this Accumulation/Distribution thing been going on for? Sounds a bit mystical to me...it can't last..
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Profitaker
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Tony
On the basis that a stock or index price can change in only 1 of 2 ways, i.e. it can go up or it can go down. If you download data for any stock or stock index for a significant period (say 10 years or more) and count the up days and down days I guarantee they will be (more or less) 50/50 Up/Down.
So that then leaves the question do stocks and indices trend, i.e. is an up day more likely to be followed by another up day and vice versa. Certainly from the studies I’ve done using FTSE100 data (since 1984) the answer is no, it’s still 50/50. For example, if there have been 3000 up days there will be roughly 1500 occasions of two consecutive up and roughly 750 occasions of 3 consecutive up…..and so on.
On the basis that a stock or index price can change in only 1 of 2 ways, i.e. it can go up or it can go down. If you download data for any stock or stock index for a significant period (say 10 years or more) and count the up days and down days I guarantee they will be (more or less) 50/50 Up/Down.
So that then leaves the question do stocks and indices trend, i.e. is an up day more likely to be followed by another up day and vice versa. Certainly from the studies I’ve done using FTSE100 data (since 1984) the answer is no, it’s still 50/50. For example, if there have been 3000 up days there will be roughly 1500 occasions of two consecutive up and roughly 750 occasions of 3 consecutive up…..and so on.
TheBramble
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I'll take the bait.
For those that haven’t linked it, this is a spill-over from the 'Having an Edge' thread that new-Trader started and can’t seem to finish. For a man whose just discovered a genuine edge, I don’t feel the joy and happiness in your posts - all I can detect is, basically, the edginess.
Accumulation/Distribution is not an edge. Neither is a Trend. Nor is Support or Resistance. Nor are Channels. Nor is a Breakout. Not any other basic chart pattern either. They are all manifestations of the end result of the aggregate positions of the various constituents of that market in those instruments.
These are not edges. These are the basic structures and mechanics of the market.
Your edge, is how YOU decide to evaluate, assess and utilise these behaviours for your own profit. If you’re doing so consistently, you have an edge, if you’re not, you don’t. You have to take as a working hypothesis that there are as many edges in existence for any given market structure as there are traders consistently profitably treading these structures – as they evolve over time.
Edges disappear, sometimes forever, sometimes for long periods, sometimes for a short while. There was/is a trader on here whose edge was completely stuffed by the recent changes in the ECN structures. He’s smart enough to find another edge and I hope he has. But he would confirm, edges are what you do with what you know about the market you’re trading, not just simply knowing it and (central thrust) you need to keep working at developing your edges. You have to take as another working hypothesis that every fool knows what the market is doing (gross over-statement I know), but cannot grasp what it is they need to do to leverage that knowledge.
You work with the basics, the most basic basics, to develop your edges. Recognising what accumulation/distribution is and when it may be occurring is of no use to you at all unless and until you have a trigger to pull, and are willing and ready to do so.
TheBramble
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They can also consolidate/range, but that's just another trend in a smaller timeframe and is a side issue.
Do they go up and down by the same amount? Do up days and down days tend to occur in clusters? If they don't, every chart would be a flat line.
Within the context of an existing trend, yes, day/bar N+1 has a higher probability of continuing the trend than not.
I think that's the point. When you're IN at rend, your probablity is greater then 50% of the trend continuing. Works for me.
That is not necessarily the point of a trend. For a stock to be trending it doesn't need to have consecutive up days. A trend can be defined in many different ways depending on your own ideas, only one of those would be consecutive "up days". If a share is trending then you can use those retracement days as a buying opportunity.... or you could decide that the trend doesn't exist...or that the retracement is actually the start of a downtrend... each to their own really.
TheBramble
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Timeframe
A Trend exists in the timeframe a trend exists.
For convenience, timeframes are often labelled Long, Intermediate and Short. But there is no fixed timeframe associated with any of these terms.
Take any instrument and choose three timeframes. Can you determine a trend in any or all of these timeframes? For those that you can, you can trade it with a greater than 50% probability of success (appropriate exit criteria assumed).
As mentioned elsewhere, I’d go with a trend trade when all three timeframes have a trend and it’s going in the same direction in all three!
Even in a trading range/consolidation on a daily timeframe, you can zoom into the 15 min or 5 min or even 1 min chart and find tradable trends. Albeit with smaller absolute price moves, but above scalp level.
A Trend exists in the timeframe a trend exists.
For convenience, timeframes are often labelled Long, Intermediate and Short. But there is no fixed timeframe associated with any of these terms.
Take any instrument and choose three timeframes. Can you determine a trend in any or all of these timeframes? For those that you can, you can trade it with a greater than 50% probability of success (appropriate exit criteria assumed).
As mentioned elsewhere, I’d go with a trend trade when all three timeframes have a trend and it’s going in the same direction in all three!
Even in a trading range/consolidation on a daily timeframe, you can zoom into the 15 min or 5 min or even 1 min chart and find tradable trends. Albeit with smaller absolute price moves, but above scalp level.
Profit,
What you are saying is true enough...it's a churning machine that reflects the underlying growth in GDP which is actually only skewed 3% to the upside in the long run.
What that means is the over and undershoot around that is a constant battle between value seekers and speculators....it's also why regression to the mean is set in concrete and gives the appearance of 'efficient' but random markets from purely a statistical point of view.
This not the same as saying that you cannot trade that to profitability by recognition of participant activity and tactical money/trade management based upon that recognition.
I'm sure if I logged the number of rainy days here in the NW I'd find some statistical appreciation of same and if that is all I had then walking outdoors 1 and half days out of 3 would get me wet..but if I want to skew my chances of not getting wet all I have to do is know how to look up and smell the air and carry an umbrella just in case.
Did I really say 1 and half days...LOL...
What you are saying is true enough...it's a churning machine that reflects the underlying growth in GDP which is actually only skewed 3% to the upside in the long run.
What that means is the over and undershoot around that is a constant battle between value seekers and speculators....it's also why regression to the mean is set in concrete and gives the appearance of 'efficient' but random markets from purely a statistical point of view.
This not the same as saying that you cannot trade that to profitability by recognition of participant activity and tactical money/trade management based upon that recognition.
I'm sure if I logged the number of rainy days here in the NW I'd find some statistical appreciation of same and if that is all I had then walking outdoors 1 and half days out of 3 would get me wet..but if I want to skew my chances of not getting wet all I have to do is know how to look up and smell the air and carry an umbrella just in case.
Did I really say 1 and half days...LOL...
Profitaker
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Absolutley agree.
But the OP was questioning if trend following works. I maintain that taking a position in a stock for no other reason than having eyeballed a trend on a chart doesn't work. Statistically it's a given.
dbphoenix
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If anyone wants to discuss the analysis like a real trader, I'll be happy to participate. If, instead, this is to be yet another ET-style poo-throwing thread, I'd rather one of the mods delete all the posts I've made to it and move on to something else.
Db
Db
I agree with DB.
Take your arguments and pettiness elsewhere please.
Personally, I enjoy discussing these things and don't feel the need to take offence or try and cause offence because someone doesn't agree with what I say or think or even thinks what I say is totally stupid... that is their opinion and like me they are entitled to it.
This is funnily enough how adults behave..... most of the time!