Why is the trend our friend? - page 2
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"Trend is your friend" is quite an often quoted phrase in the manuals, but no one says what trends we are talking about. Is it the short, medium or long term? At the end, even the direction of the trend becomes subjective.
Because anyone can trade the trend without much knowledge about the markets. The problem is we don't know when trend going to end.
Parabolic Sar can be very handy to know when a trend is going to end. The important thing is to catch the trend in the start so that we can gain maximum pips from the move.
I am sure about the trend only when the Adx is above 30, and only in that moment I perform trend follower operations on the market corrections.
"Trend is your friend" is quite an often quoted phrase in the manuals, but no one says what trends we are talking about. Is it the short, medium or long term? At the end, even the direction of the trend becomes subjective.
THAT is the question.
It is very difficult to determine mathematically what the trend is. The price time series contain a lot of splashes and the inner structure of these splashes is mostly unknown. Any visible "trend lines" drawn manually tend to get trend's direction VERY subjective.
Mathematical background for robust trend detection is unavailable. BUT if You take a look at my profile you will find something robust.
On the other side IF the trend exists at this moment, the probability of profit is rising dramatically in "following the trend" strategy.
THAT is the question.
It is very difficult to determine mathematically what the trend is. The price time series contain a lot of splashes and the inner structure of these splashes is mostly unknown. Any visible "trend lines" drawn manually tend to get trend's direction VERY subjective.
Mathematical background for robust trend detection is unavailable. BUT if You take a look at my profile you will find something robust.
On the other side IF the trend exists at this moment, the probability of profit is rising dramatically in "following the trend" strategy.There is nothing at your profile
There is nothing at your profile
Homepage.
As to really math basement for trend detection:
There are two approaches-
1). DSP approach.
Problem: very slow, extremely complex, very difficult to put into real computer program. Probably it is used by James Simons in Renaissance Technologies. They use very uncommon math formulas, totally unknown in trading/finance world.
Renaissance Technologies - Wikipedia, the free encyclopedia
James Harris Simons - Wikipedia, the free encyclopedia
2). Statistical/probability approach.
Problem: everything after 1945 is useless due to extreme distortion of math science after Kolmogorov's axioms.
Both approaches are very hard to put into working computer program.
Because it is meant to remind traders to always identify the prevailing trend, and never to trade against it, but rather wait for retracements and then enter trades in the direction of the trend.
In recent years I have developed contrarian strategies that gave me some interesting results. Taking advantage of the excesses of sentiment is a technique against the trend, but it has an acceptable risk-return profile.
A well defined trend in trading is a trader's best friend until it bends...
PA