When people talk about very long term trend following systems what sort of lengths of time are they discussing?
For example:
a) What length MA's would be used in this kind of system?
b) How many day's breakout?
I know for example that the original Turtle system is considered medium term trend.
I'm designing first system and have enough capital and patience/discipline around money management and position sizing to weather the drawdowns that the truly long term approach inevitably brings but was wondering how long "long" is......?
How long is "very long term trend following"
Some people prefer to hold trades for minutes. Other people prefer to hold trades for years. When you figure out how long you prefer to hold trades, it will help you tailor a trading method so it fits your personality.
You can run simulations and get a feel for the relationship between trade duration and tightness or looseness of stop. You can get a feel for the relationship between trade duration and number of days in a Donchian channel or a moving average. But simulations only tell you about trading systems; they don't tell you about yourself. What you prefer, what you are comfortable with, what you can believe in and continue to trade in the middle of painful drawdowns: these are aspects of your own individual psyche, not statistics of trading systems. They come from introspection, not backtest simulations.
You can run simulations and get a feel for the relationship between trade duration and tightness or looseness of stop. You can get a feel for the relationship between trade duration and number of days in a Donchian channel or a moving average. But simulations only tell you about trading systems; they don't tell you about yourself. What you prefer, what you are comfortable with, what you can believe in and continue to trade in the middle of painful drawdowns: these are aspects of your own individual psyche, not statistics of trading systems. They come from introspection, not backtest simulations.
200 to 300 days is generally considered very long term in my view. This will result in your winning trades being at least a year and often 2 or 3 years. Mentally this can be a very difficult type of system to trade as you will sit on unrealized gains for years and never be able to realize gains on market spikes. Watching massive unrealized gains dissappear can be very difficult but if you have the fortitude then you will likely be successfull trading a LTTF system. Go ahead and backtest simple bollinger band type systems on very long term moving averages and I believe you will be happy with the results. Good luck.
Many thanks to you both for your sage perspectives
Long term trend following has resonated with me because:
I have great self-discipline, I don't feel a need to "be right", I have patience, I believe the markets do trend and are imperfect amongst many other reasons
None of the above can be verified as having an ounce of credibility until tested in the crucible of actual trading. But as Sluggo rightly states, I have to start somewhere building on a foundation of what I believe.
So the above, married with the pragmatic fact that I need to fit this in with a day job meaning being glued to screens at the short term end of the market is not something I could make happen (even if I wanted to) means that long term trend following is where I will start....
Long term trend following has resonated with me because:
I have great self-discipline, I don't feel a need to "be right", I have patience, I believe the markets do trend and are imperfect amongst many other reasons
None of the above can be verified as having an ounce of credibility until tested in the crucible of actual trading. But as Sluggo rightly states, I have to start somewhere building on a foundation of what I believe.
So the above, married with the pragmatic fact that I need to fit this in with a day job meaning being glued to screens at the short term end of the market is not something I could make happen (even if I wanted to) means that long term trend following is where I will start....