Is the concept of momentum and trend trading flawed?

[foroom lluzers]

I'm always searching for things to test out. I have tested out a bunch of stuff in the past, but somewhat aimlessly. I am trying to do more testing with purpose now and with better documentation so that I can hopefully make some forward progress.

I'm a bit short on time at the moment, but feel free to make some suggestions - anyone can. Feel free to post suggestions in my journal (in the process of fixing ATM) or send me a PM.

If you back test with fundamental price drivers , that triggered the trends , it would give far better results .It would mean selective attention back-testing .Stocks have a 75% /25% long bias/short bias , have you back tested this?

These are 5 year indices back-tests , showing a clear long bias.

I will unsubscribe again.

 

[tar]

TLDR

But to answer your question :Is the concept of momentum and trend trading flawed?


Surely not flawed .

 

[Pat494]

Have you tested divergences yet ?
Perhaps using different methods e.g. typical, median, weighted, smoothed etc. and different periods.
If you could make it adaptive there may be some mileage there ?

 

[Dr. Toad]

Have you tested divergences yet ?
Perhaps using different methods e.g. typical, median, weighted, smoothed etc. and different periods.
If you could make it adaptive there may be some mileage there ?

I have never really used indicators so I'm going with no on this one. I am assuming you are talking about divergence between an indicator and the price action. Which indicator would you use for this?

 

[Pat494]

I have never really used indicators so I'm going with no on this one. I am assuming you are talking about divergence between an indicator and the price action. Which indicator would you use for this?

Not necessarily price. Could be 2 moving averages for instance. They will diverge on upward momentum and come together as momentum slackens until they cross.

 

[Ifmyante]

Trend trading is dangerous, as it's just following the herd down the usual path of misinformation towards the final margin call.

So, what's happening in the PA?

In the uptrend, the IT (Institutional Trader, who runs the market) is swapping his net position from long to short, using the common knowledge of trend and SD to fill his orders, so that

There's no such thing as trend. All there is is an engulf which has or hasn't yet hit its target.
But that's a lesson for another day

 

[tomorton]

Trend trading is dangerous, as it's just following the herd down the usual path of misinformation towards the final margin call.

So, what's happening in the PA?

In the uptrend, the IT (Institutional Trader, who runs the market) is swapping his net position from long to short, using the common knowledge of trend and SD to fill his orders, so that

There's no such thing as trend. All there is is an engulf which has or hasn't yet hit its target.
But that's a lesson for another day

I didn't recognise exactly what you're talking about. Trend-following is simple, low risk and rewarding. I didn't recognise the style of trading your diagrams showed but maybe that's a good thing for me.

What does SD mean?

 

[dbphoenix]

If there's no such thing as trend, what has the market been doing for the past nine years?

 

[Ifmyante]

It's been filling small ranges in a large range, picking up stops at every extreme.
Business as usual

 

[Ifmyante]

I didn't recognise exactly what you're talking about. Trend-following is simple, low risk and rewarding. I didn't recognise the style of trading your diagrams showed but maybe that's a good thing for me.

What does SD mean?

SD is supply/demand. It's a trick used to make the herd feel they can have an edge in their trading, so they'll keep depositing more after every margin call, because they're "so close to getting it"

Trend following is dangerous!
Go to the charts, and come back and tell me that this isn't to be found all over them:

 

[EnlightenedJoe]

Since very few can benefit from trends because most have no capacity to deal with the counter-trend moves that are specifically designed to defeat trend followers, the question of whether trend exists or not is not critical in practice.

The best time to jump on a trend is wait for most if not all trend followers are dead. That way the merchants will have no more reason for the counter-trend move to continue. There will be no money in it.

 

[Ifmyante]

Since very few can benefit from trends because most have no capacity to deal with the counter-trend moves that are specifically designed to defeat trend followers, the question of whether trend exists or not is not critical in practice.

The best time to jump on a trend is wait for most if not all trend followers are dead. That way the merchants will have no more reason for the counter-trend move to continue. There will be no money in it.

That's not the worst place for learners to begin, but a deep understanding of the use of propaganda in trading education allows for the picking of tops and bottoms. Those who abhor drawdown will naturally strive for the latter

 

[EnlightenedJoe]

That's not the worst place for learners to begin, but a deep understanding of the use of propaganda in trading education allows for the picking of tops and bottoms. Those who abhor drawdown will naturally strive for the latter

I don't abhor drawdown. It's natural like a rain downpour. After rain, there is sunshine.

 

[Ifmyante]

I don't abhor drawdown. It's natural like a rain downpour. After rain, there is sunshine.

I can't deny that I'd love to share that philosophy

 

[dbphoenix]

It's been filling small ranges in a large range, picking up stops at every extreme.
Business as usual

IOW, trending.

 

[Ifmyante]

IOW, trending.

I light a candle, and you blow it out.
If darkness remains, it's on you!

 

[tomorton]

SD is supply/demand. It's a trick used to make the herd feel they can have an edge in their trading, so they'll keep depositing more after every margin call, because they're "so close to getting it"

Trend following is dangerous!
Go to the charts, and come back and tell me that this isn't to be found all over them:

You're either paranoid or wrong.

 

[Ifmyante]

You're either paranoid or wrong.

Are you saying that you couldn't find that trick all over the charts, or that you didn't bother to look?

If you want to call me paranoid, fine, I can take it, but only if you explain why.

If not, how am I wrong?

Would admitting that I may be right be a conflict of your interests?

 

[EnlightenedJoe]

Are you saying that you couldn't find that trick all over the charts, or that you didn't bother to look?

I have to admit I can't find it either. Here's the trick I use to see what they are doing: I have positions all over the place and see what they do with those. There would be no guess work then.

Here's an actual example. My short position is on the yellow line. They wanted me out. So they drag the price along the line and pray I would get out. Since I am familiar with their entire play book, I will not be getting out until they pay me. In the end, I will win.

 

[dbphoenix]

I light a candle, and you blow it out.
If darkness remains, it's on you!

The "darkness" stems from defining trend improperly.