**** me... huge realisation about why trend followers survive longer...

shadowninja said:
Well, that is pretty much the issue; if you trend trade euro with a 10 pip stop, you will hand a lot of money over unless you are really, really good with your entry (this is, of course, possible). But even if you use something more sensible like a 50 pip stop and entered near the top of yesterday's euro range, you'd be stopped out as a trend trader.
Click to expand...
But I don’t think may trend followers trade with a fixed stop. You look at potential entry and then you look at where it could reverse to beyond which you’ll admit you got it wrong – your stop. If it’s more pips than you feel is going to meet your baseline R:R you simply don’t take the trade.

I don’t have a baseline R:R, but I know for my trading TF and any given pair my ‘normal’ stop range. If it’s too large compared with potential targets, I simply don’t take the trade.

I think we’re ignoring trader experience and method utilised and focussing on absolute stop size as the ultimate arbiter of trade (and traders) success, which it isn’t.
 
i dont think this is about stops at all :eek:

its about comparing one strategy with another on unequal terms and then making a judgement based on it.
 
TheBramble said:
But I don’t think may trend followers trade with a fixed stop. You look at potential entry and then you look at where it could reverse to beyond which you’ll admit you got it wrong – your stop. If it’s more pips than you feel is going to meet your baseline R:R you simply don’t take the trade.

I don’t have a baseline R:R, but I know for my trading TF and any given pair my ‘normal’ stop range. If it’s too large compared with potential targets, I simply don’t take the trade.

I think we’re ignoring trader experience and method utilised and focussing on absolute stop size as the ultimate arbiter of trade (and traders) success, which it isn’t.
Click to expand...

I brought up stops because it is one thing to consider if we're looking at successful and unsuccessful traders who are trading the trend. I just think that Arabian's original post is not considering everything.
 
I think most of us would disagree with Arabs orginal premise that the markets are pretty much efficient, otherwise we wouldn't be here.

I been watching the stock markets nearly every day since 1999 and FX since 2004.

Although you do get prolonged periods when it is hard to make money.
Over the last 12 years the markets have been really good, at least for intra day directional traders.
 
donaldduke said:
I think most of us would disagree with Arabs orginal premise that the markets are pretty much efficient, otherwise we wouldn't be here.

I been watching the stock markets nearly every day since 1999 and FX since 2004.

Although you do get prolonged periods when it is hard to make money.
Over the last 12 years the markets have been really good, at least for intra day directional traders.
Click to expand...

Speak for yourself.
 
shadowninja said:
I brought up stops because it is one thing to consider if we're looking at successful and unsuccessful traders who are trading the trend. I just think that Arabian's original post is not considering everything.
Click to expand...

well pretend there are 2 traders, a mean reversioner and a trend follower that both trade with teh same - fixed - R:R

the mean reversioner does 20 trades a day, the trend follower does 3 a week.

after 3 months teh mean reversioner blows up. hes done 1200 trades, and the trend follower has done 36.

it isnt ok to say "well, the trend follower is a better trader or has a better strategy" is it. but after 1 year the trend follower will have done 144 trades and could still be just as much a loser as teh mean reversioner.

But the trend follower might go on a forum and after 1 year newbs come on and go "oh hes a trend follower and hes been trading at least one year and all the mean reversioners never last more than 3 months. Trend following must be better"
 
DashRiprock said:
i dont think this is about stops at all :eek:

its about comparing one strategy with another on unequal terms and then making a judgement based on it.
Click to expand...
Stops have been brought into the discussion.

As for comparing on unequal terms, I don't see any terms at all being specified.

Just assumptions. Trend followers wait for more confirmation. Trend followers do less trades. This may well be Arabian's view and based on his experience, but it's not mine.
 
I think Arabian is making an assumption that mean reverters will trade more frequently than trend followers on the same timeframe. It's pointless comparing mean reverters on 5m with trend followers using the weekly.
 
shadowninja said:
I brought up stops because it is one thing to consider if we're looking at successful and unsuccessful traders who are trading the trend. I just think that Arabian's original post is not considering everything.
Click to expand...
Agreed. But there are simply too many factors relating to individual trading styles and experience even within just the two methods mentioned to make any sensible evaluation extremely unlikely. Some interesting points being covered though.
 
robster970 said:
I think Arabian is making an assumption that mean reverters will trade more frequently than trend followers on the same timeframe. It's pointless comparing mean reverters on 5m with trend followers using the weekly.
Click to expand...

well i can only speak from why i know from trading... and this might be a little "too far out there" but ill go anyway :LOL:

well really yes it is fair to compare a 5m mean reversioner (MR) to a weekly trend follower (TF).

because in the very short term prices are moved by orders in not enough time for the fundamentals to change. so lots of orders might move the market but if nothing has changed the price will go back to mean. same thing in reverse if you look at gaps from NFP and stuff... its the fundamentals that change the price not order flow (but cos if the liquidity its hard to trade the trend on an NFP gap)

its the same for like on a weekly because the order flow will average out, what is "moving the mean" is like there is new information improving/confirming the fundamentals and stuff like that.

anyway rambling now ill stop.


i re read it and i can make it easier i think: there are two things that move markets - orders and information.

mean reversioners are trying to trade when the orders have moved the market and net information is 0 (ideally no new information at all).

trend followers are trying to trade when there is a trend in information and net order flow is 0 (they can effectively ignore it)
 
TheBramble said:
I appreciate this is just an example, but you’re perpetuating a bias that has no basis.
Click to expand...

well following on from my post above, lets say that the two traders we're comparing:

Mean Reversioner makes decisions on 80% order flow 20% information
Trend Follower makes decisions on 20% order flow 80% information

so in their ratio's they are equal but opposite. they will deffo be trading at different frequencies.
 
DashRiprock said:
the mean reversioner does 20 trades a day, the trend follower does 3 a week.
Click to expand...
OK. Just for clarification, are you suggesting that it would be more likely that our average MR trader would likely be trading a shorter time frame than your average Trend trader?
 
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