Asymmetry and the Short Side
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- Roundtable Knight
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Asymmetry and the Short Side
What methods do you find to be most effective for capitalizing on the short side of the equity market?
Last edited by shakyamuni on Sat Jan 08, 2005 5:39 pm, edited 1 time in total.
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- Roundtable Knight
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Trend persistence
The chart above shows the difference in up and down trends for liquid US equities over the last 20 years. Note that due to survivorship bias companies that have trended down to zero are not included. There is still a big difference in how equities move up to how they move down even accounting for this bias.
The data was generated using Trading Blox builder by defining a trend as an X ATR(Y) move over Z days and then examining the price T days later to see if it was up or down. 300 different parameter sets for X, Y, Z and T were used and the win% of each system instance applied to a list of liquid US equities was plotted on the frequency distribution.
My conclusion: what goes up usually goes higher, but not necessarily vice versa.