What Trends better????

[NJ23]

Can you tell me why TF works well on alu, copper etc but not on crude and vice versa if take mean reversion strategy.... The basic question i am asking my self since long "why trend develop"... be it fashion trend or stock, stock index, commodity etc.... Before i go all in i need a answer to "why", since doing backward 13 months and forward 8 months testing my TF system on nifty data i was quit confident regarding the strategy but after testing it on crude 12 months i am little bit skeptical, though 12 months result ended in 18%+ profit but result was not worthy enough to take so much equity swing on capital.

Thnakx

Edit:- I have gone through much of the material by CTA (commodity trading advisers) of Managed Futures and how they do trend following still couldn't figure out why trend develops. If you can point me in the direction of something regarding this it will be of great help, research paper etc....

Every time series has its own characteristics. Some are trending, some are cyclical. That's why we need different models (systems) for different time series. One possible reason why Crude doesn't trend much is that there's a lot of audience for the show and they'd want every smallest bit of profit to be extracted, into their PnL (be it for any reason, pure speculation or hedging). In other words, it's an efficient market. What works on Nifty shouldn't work as good on Crude (not to say that it wouldn't work, but not as good because there are still some smaller trends). Trending markets are generally more inefficient (paying off liquidity for trends).

I generally don't go on looking out for a "why". In my view, it's a worthless pursuit.

 

[sherbaaz]

still couldn't figure out why trend develops

Hi,

as far as trading is concerned why is not of much imp it is how i will trade in the trend is the most imp thing to know for a technical trader.

now coming to your Q, trend is an expansion of volatility preceded by contraction of volatility. expansion----> contraction----> expansion this cycle keeps repeating in the mkt.

in contraction stock is either accumulated or distributed depending where the price is and expansion is the mark up of the price. Why does accumulation happens ? it happens as professionals think that a strong stock has come too much down. what is a strong stock it may be strong for any number of reasons no imp to know for an individual trader.

Those who have knowledge and resources buy at the bottom, these group of ppl are commonly known as smart money. They never want to buy high price. they are bargain hunters.
once supply is dried up in accumulation or demand > supply stock moves an uptrend starts. why uptrend or mark up phase forms ? to give opportunity to sell stock bought at lower price.

this is broadly why trend forms.

regds,
s

 

[amitrandive]

What TREND better, commodity like crude, copper, gold, silver etc or Stock index.... Same system applied on both (Crude and Stock index) gave a significantly different results..

If trader wish to follow a TREND FOLLOWING strategy which instrument should be use for trading..... Any insight from any one will be highly helpful and appreciated....

Thankx in advance....

Just my views

You cannot apply same systems for Equity,Commodity and Forex markets.
Even in the same market like commodity you cannot hope to trade everyday with the same strategy.

Markets trend only 25% of the time and the rest 75% of the time they are sideways.
You need to have minimum two strategies.
One for the trending markets and the other for sideways markets.

Find your niche and you stay with that, why run around trying to trade everything after you find one that suits your 'personality'.

Trading should be boring not exciting because boring monotonous things make consistent money.

 

[saakk]

Every time series has its own characteristics. Some are trending, some are cyclical. That's why we need different models (systems) for different time series. One possible reason why Crude doesn't trend much is that there's a lot of audience for the show and they'd want every smallest bit of profit to be extracted, into their PnL (be it for any reason, pure speculation or hedging). In other words, it's an efficient market. What works on Nifty shouldn't work as good on Crude (not to say that it wouldn't work, but not as good because there are still some smaller trends). Trending markets are generally more inefficient (paying off liquidity for trends).

I generally don't go on looking out for a "why". In my view, it's a worthless pursuit.

I know asking "why" is futile pursuit, it just came into existence some days back when i completed my crude back testing... may be i need more data to test or if i have tested the same system in 2008 it might have given different result because it was highly volatile that time high 6358 july 08 to low 1680 feb 09... May be the whole sector if out of favor currently just like the oil refinery and exploration stocks which made no money on the long side....

 

[NJ23]

I know asking "why" is futile pursuit, it just came into existence some days back when i completed my crude back testing... may be i need more data to test or if i have tested the same system in 2008 it might have given different result because it was highly volatile that time high 6358 july 08 to low 1680 feb 09... May be the whole sector if out of favor currently just like the oil refinery and exploration stocks which made no money on the long side....

Maybe. Testing TF strategies when there was a trend, would yield better results, but I doubt that system can be (as) successfully applied going further. I think, a different system for Crude would be a better idea.

 

[saakk]

Maybe. Testing TF strategies when there was a trend, would yield better results, but I doubt that system can be (as) successfully applied going further. I think, a different system for Crude would be a better idea.

Mean reversion you mean......

 

[NJ23]

Mean reversion you mean......

Yeah or a TF in a creative way.