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« A Closer Look at Current Survey Results | Main | Weighing the Week Ahead: Fireworks in the Forecast? »

June 27, 2012


Johan Linden

Thank you for your answer Jeff. I think you answered the question yourself when you say you have a mean-reversing method.

Of course you can find specific instruments and time-frame where trend following works but in general and in a daily time-frame trend following has lost its glory (for now). It worked well to the 80's and 90's. Many prominent bloggers have made notes and studies about this. Such as Steenbarger, Quantifiable Edges, Mark Hulbert just to mention a few.

My point is to warn about making general recommendations for how to have an edge in trading. How to control and manage risk can be generalized but trading edges will be different from one or several year(s) to another.


Johan -- I only read a few trading blogs, but I have read a lot of serious work on trading systems. (search the blog for Ralph Vince or trading systems) My company has excellent model developers. We have evaluated hundreds of trading systems over 25 years, selecting only a handful for use.

I also number many successful traders among my friends. They generally like to scalp and range-trade. They do not use statistics at all. They often are playing very short-term trends, which is why I mentioned time frames. Their methods are personalized and not really subject to testing.

Those of us from Chicago are perhaps closer to Richard Dennis and the Turtle experiment, but everyone knows about it. It is this kind of evidence that I had in mind when I wrote the sentence you quoted.

I have also said frequently that there are many ways to succeed in trading and investing. We also had an active and successful method based on mean-reversion, but we are not trading it right now.

My guess is that many of the bloggers you are reading will not be around in a year -- a guess based on watching hundreds of traders at the CBOE.

Anyway, thanks for the kind words about the blog, for reading, and for raising this interesting question.


Johan Linden

"It is well-established that trend-following methods are effective. It all depends on the time frame and the setup."

Is that so? Most serious trading blogs that have the slightest knowledge on statistics seems to disagree. I promise you that I show you two sources for every source you show me that says differently.

But still, this is a very good site. Keep up the good work!

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