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--- In amibroker@xxxxxxxxxxxxxxx, "joeemmett2000" <joeemmett@xxx>
wrote:
> My next question probably has as many answers as readers. What
> determines a market uptrend? I was thinking something along the
lines
> of; C > Ref(C,-2) and Ref(C,-2 > Ref(c,-5). Any ideas on this also
> appreciated. Joe
>
Joe,
Here's my go at what constitutes a trend ....
A trend is a period of price behavior differentiated
from the usual efficient/random behavior of stock
market prices by anomalous serial (bar-to-bar)
correlation.
At some point, all trends are recognized as being
trends because (within the context of your trading
timeframe) this anomalous serial correlation is
eventually obvious (visually and/or mathematically) in
comparison to historical price behavior. By the time
it is obvious, unfortunately, you've usually missed
out on what is often the strongest and most decisive
part of the move. Furthermore, missing out on the
backlog of profits that is possible from entering a
trend early in it's development will make it harder to
stay with the shorter-term counter-trend fluctuations
(a simple, but powerful concept stolen from Jesse Livermore).
Anomalous serial correlation (although rarely identified as such)
eventually shows up on any
number of technical analysis indicators as a change of
slope, the crossing of some threshold, etc. There are
a few problems with most technical indicators, though.
Many are range-bound (in the case of many oscillators and
bands) which implies that prices are normally
distributed about a mean value and will maintain this
distribution about the mean within a fairly
predictable framework (proven to be a false
assumption). Secondly, almost all TA indicators are
cycle-bound, i.e. highly influenced by the duration of
the time window or smoothing filter that is applied.
Simply put, the challenge (as I see it) is really no more complicated
than to identify the anomalous price behavior as early as possible.
So, define an anomaly (as many definitions as readers, as you so
correctly put it) and trade it. Then comes the real battle - the one
of trader vs. self.
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