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At 1:59 PM -0400 6/5/99, gmtac wrote:
>But maybe I am wrong on what countertrend means.
It does seem counter intuitive but can make sense.
If you wait until a clear uptrend is established to buy into some markets,
such as the S&P futures, it is hard to get filled and the slippage can be
very large. Buying put or call options with the trend is also very
expensive because of the higher implied volatility.
So if you can figure out a system for buying just before the downtrend ends
(countertrend?), you get fast fills and negative slippage. Also options are
much cheaper since the implied volatility is much less.
If the trend is clearly up, who is going to be a seller? This is
particularly true if you are trading many contracts.
So trading against the trend, or more accurately just before the end of the
last trend, can be more profitable than trading after the new trend is
obvious.
Bob
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