Posted: Tue May 22, 2012 4:01 am
I like this thread.
AFAICT the application of a momentum screening approach is the single best way to get edge in stock trading. All of the successful equities traders that I ever met(not an exactly massive sample admittedly) never had even halfway decent actual entry/exit logics. e.g. they were just buy/sell if Momentum(10)>0. And so if you tested them out, applied universally, you would lose quite efficiently. But what all these guys did in one way or another was come up with a way to filter down firstly to a more manageable universe of diversified stocks that were active, and then only placed positions(intraday) in a few of the strongest/weakest. I think this was the real adge, as any old momentum rule works in strongly moving tme-series.
The key lies in not applying rules and trades to markets that don't have momentum going forward.
I have seen similar evidence elsewhere that this is how people make money trading JUST currencies.
I think that regardless of the merits found in backtests of a universal application of trades across all the constituents of a large(futures) portfolio, it is highly probable that a well thought out way of objectively measuring and then filtering for momentum and then trading only a [perhaps very] small subset, will be more robust in live application.
I think I have a good baseline filter that I might be willing to share....
AFAICT the application of a momentum screening approach is the single best way to get edge in stock trading. All of the successful equities traders that I ever met(not an exactly massive sample admittedly) never had even halfway decent actual entry/exit logics. e.g. they were just buy/sell if Momentum(10)>0. And so if you tested them out, applied universally, you would lose quite efficiently. But what all these guys did in one way or another was come up with a way to filter down firstly to a more manageable universe of diversified stocks that were active, and then only placed positions(intraday) in a few of the strongest/weakest. I think this was the real adge, as any old momentum rule works in strongly moving tme-series.
The key lies in not applying rules and trades to markets that don't have momentum going forward.
I have seen similar evidence elsewhere that this is how people make money trading JUST currencies.
I think that regardless of the merits found in backtests of a universal application of trades across all the constituents of a large(futures) portfolio, it is highly probable that a well thought out way of objectively measuring and then filtering for momentum and then trading only a [perhaps very] small subset, will be more robust in live application.
I think I have a good baseline filter that I might be willing to share....