Trend following question

[Ferru]

In the simulations in Appendix A of Trend Following (by Michael Covel), the long trades do considerably better overall than the short trades.

I suspect that's because the long-term average price movement of the instruments in question was upwards, and the short trades were fighting against upward longer-term momentum.

Do you guys agree?

Thanks

Jeff

 

[intradaybill]

No. It is because market uptrends end abruptly and the systems follow with a lag, thus missing a good part of the downtrend. Also, downtrends are more unpredictable in terms of needed win rates, etc. This is a good article with a quantitative explanation as to why trend following is hard.

 

[Ferru]

Thanks Intradaybill

Would that not apply to long trades too though, as you can never catch a top or bottom of a trend with trend following?

Jeff

 

[intradaybill]

It does to a lesser degree and that is the point. Look at any chart. Long trends take long time but short trends last much less. This is one reason that short trades do worse.

 

[Ferru]

Long trends take long time but short trends last much less.

Thanks. Why is that though?

Jeff

 

[Splitlink]

Thanks. Why is that though?

Jeff

Perhaps, it is because a trader, entering a long term trade, has more time in it than one entering a short term one, making a longer trade more suitable to the character of the trader using it.

IMO, the safest time to enter any trend is to wait until my signals confirm.

Whiplashes are up and down movements around a sideways moving average. These are very difficult to analyse on short term charts---you try it--- and can result in a series of irritating losses, even if they are kept small. These whiplashes are fewer with longer term time frames and, in my experience, can, in any case, be traded in and out without losing much, if any money, if it is not analysed correctly.

But, to answer your question in another way, perhaps, it is because a short term up trend, for example, is often countertrend to a more important downtrend. Wheels within wheels

Hope my ramblings have some use.!

 

[Pat494]

'cos mostly FEAR is a greater motivator than GREED

 

[Bint_Crusher]

Who out there has an irrational need to short sell as opposed to go long on a trade? I always have had a tendency to sell after a parabolic move but not so much to buy.

 

[Splitlink]

Who out there has an irrational need to short sell as opposed to go long on a trade? I always have had a tendency to sell after a parabolic move but not so much to buy.

Me!

After the open , with the usual good surge, the pullback was always a psychological problem for me. Is it going to reverse, or continue? Is it the high for the morning, or will it go higher?

Too many mistakes have made me a wiser man, now. I always watch the averages, even if they do lag, they mark a trend for me that helps. But I find higher timeframes more reliable, even though the risk, because of a bigger stoploss distance, is larger the chances of getting stopped are fewer.