Contra Trend Following Techniques

How do you know when a trend has started? Ended? This forum is for discussions about trend indicators and signals.
Post Reply
Trendtrader66
Contributing Member
Contributing Member
Posts: 5
Joined: Thu Apr 17, 2003 12:59 pm
Location: Bay Area, California

Contra Trend Following Techniques

Post by Trendtrader66 » Fri Apr 25, 2003 5:40 pm

I have read that some fund managers use several types of non-correlated trading strategies. These strategies might include long term trend following systems, short term trading systems, and contra trend following systems, all within their portfolio to hopefully improve their risk adjusted returns.

I am interested in learning about these contra trend following strategies but do not know where to begin! What would these strategies involve? What sort of technical indicators would be used for identification? Would Options be used, such as shorting volatility?

Thanks kindly for your help!

Kiwi
Roundtable Knight
Roundtable Knight
Posts: 513
Joined: Wed Apr 16, 2003 1:18 am
Location: Nowhere near

Post by Kiwi » Fri Apr 25, 2003 7:48 pm

Options can be used in a variety of ways. You could sell into a rise or you could sell vertical spreads into a rise to reduce you cost of sale ... for a smaller profit.

The biggest question with counter trend is when to exit as the counter trend exit is not as obvious as the trailing stop for trend following.

John

blueberrycake
Roundtable Knight
Roundtable Knight
Posts: 125
Joined: Mon Apr 21, 2003 11:04 pm
Location: California

Post by blueberrycake » Fri Apr 25, 2003 8:16 pm

Kiwi wrote:
The biggest question with counter trend is when to exit as the counter trend exit is not as obvious as the trailing stop for trend following.
Exactly. If you are selling into a rally because you believe the price is overbought, what do you do when the price goes even higher making it even more overbought according to your system? It's not an insurmountable problem, but it's one that I've always had difficulty with when building counter-trend systems.

You end up with a system that cuts its profits short and lets its losses run. Now many such systems will still have a positive mathematical expectation. Their problem is on the money management side, where you have to bet tiny if you want to avoid massive drawdowns.

-bbc

TradingCoach
Roundtable Knight
Roundtable Knight
Posts: 176
Joined: Thu Apr 17, 2003 9:52 am
Location: Sacramento, CA
Contact:

"the turtle soup" is such a system

Post by TradingCoach » Mon Jun 02, 2003 11:27 am

from Larry Conners and Linda Raschke wrote "STREET SMARTS", a book filled with trading ideas. I have the TS 2000i code for the "turtle soup" code - if need it PM me.

Post Reply