Sunday, June 17, 2007

Trend followers

I will not be active for next few months.
Few parting comments:
Trend followers might want to read
http://fnocharts.blogspot.com/2007/04/exactly-how-efficient-are-markets.html
A trend is created when there is a big supply/demand imbalance.
Usually helps if market is 'undervalued' or 'overvalued' to create a trend.
In the past few months market has been relatively flat.
We are perfectly balanced in funda terms p.e.g. of 1...
20% growth 20 p.e
Thats just my mathematics. Other more sophisticated funda investors might see things differently.
W5 insanity should take us to p.e.g of 1.3-1.6 p.e of 30-50 etc etc before I will even dare call the end of the bull market.
The trend will resume eventually. Keep in mind it is not uncommon for trend following systems to go flat for 2-5 months and give virtually no rewards to traders. This is the reason why I suggested spicing up one's trading with stuff like wolfe waves
Just be careful with wolfe waves.. A wolfe wave can often show up in places where an inv hns is also showing up and that makes me worry. Only one of the two patterns will succeed :).

Past 50 days : brute force trend following methods like 13 ema or 7/105 etc would be flat or making losses.
Traders will need more sophistication than a simple brute force approach of trend following in a lazy market to make money.
My optimized systems based on realtively efficient markets are actually performing just fine, up 10-15% even with market flat over past 50 days (system drawdown 2-5% intraday drawdown 3-5%). So My 'optimized' systems are still operating well within their expected parameter range.

Note: I always use returns without leverage.

Ex. recent buy call on litl even with market down?? Did not hit sl on closing basis
even srf is struggling but holding levels.
Both calls were sent on yahoo.
Will try to take a position in srf soon..
Still looking for 200-220 in srf from 150-155
Already booked once near 176 earlier.

No comments: