Traders' Roundtable

Trend following offers a much higher profit potential than intraday and short-term trading, no question about it, and this is IMO one of the reasons it's much harder. I found this paper in Fidelity Active Trader about approximating trend following by actually generating a sequence of appropriate short-term positions. This has some inherent advantages and I've decided to look into this in more detail and possibly try to develop a trading system. I found the article at:

http://personal.fidelity.com/myfidelity ... t2003.html

Has anyone here tried something along this lines in the past?

Ron

Ron,

In my opinion everything is trend-following and only the timeframe is different. Attempting to enter at a price and sell at a higher price is attempting to capture some form of price trend whether the bars are tick, 1 minute, 1 day, or whatever. (I know some option strategies are about finding prices that don't move but that's not what the article is about.)

Trading on a shorter bar simply means you will have more trades per period, higher implementation costs relative to profit potential, shorter trade durations, and more opportunity for making implementation errors.

The article has an inherent contradiction to me by stating that long-term trend following has problems that can be fixed by effectively trend-following on a shorter timeframe (but calling it pattern trading). If you believe that markets are fractal (i.e. price moves look similar in all bar lenghts) then short-term trend following will exhibit exactly the same benefits and problems as longer-term trend following (with the above caveats).

Let us know if your research discovers anything useful in this approach; investigating an interesting idea is never a waste of time as long as you ultimately learn something useful which often can be about what doesn't work too.

Paul