Hi James
I agree that Mr Seykota is basically saying that trends only exist as historical artefacts, ie we can say 'this market trended', but not project with certainty into the future.
To use an analogy, if a car has been travelling at speed, we can safely say that it's travelling right now. It's not going to come to a halt in an instant. The same can't always be said of a trend. At the moment of observation, all we can report is what the market has done.
Mr Seykota also makes an interesting point IMHO about how you define a trend; about it being a matter of perspective. For example, on Betfair a horse may be drifting if you're using a 200 point moving average on the 1 second chart, but steaming if you're using a 20 point moving average on the 1 second chart. So it drifting, steaming or neither? I think Mr Seykota would say that it's a matter of perspective, but doesn't matter for practical purposes. What matters is that you're consistent and have a methodology that captures the meat of any big moves that occur.
Would you agree with the above?
Jeff
Defining the trend
PS On a lighter note (and at a risk of reinforcing the impression that Seykota is a nutter! 
), here's a song about trend following that Mr Seykota wrote:
http://www.youtube.com/watch?v=LiE1VgWdcQM
BTW, Warren Buffett also has a musical side: http://www.youtube.com/watch?v=A0eEuDAt ... re=related
Jeff
), here's a song about trend following that Mr Seykota wrote:http://www.youtube.com/watch?v=LiE1VgWdcQM
BTW, Warren Buffett also has a musical side: http://www.youtube.com/watch?v=A0eEuDAt ... re=related
Jeff
Yes, I think we can agree that a trend can only be named after it has developed in much the same way as a raincloud can exhibit signs of rain but its only after the first drops have hit the ground that you can say that it is raining.
With respect to defining a trend it is also true that each person will have their own interpretation of whether 3 ticks or 10 ticks defines this movement as a trend. Not that it matters, if the trader can profit from his own definition.
Now you are introducing timescale into trend measurement and no current movement can be measured as both a drifter and a steamer. Using a long timescale such as a 200 MA will assess a series of trends, both upward and downward and present the information as a conglomerate macro view...almost totally useless for trading the now position. Of course the market can alter the direction of its trend, and frequently does, especially when it reaches the upper or lower limits of its true value.
A horse is drifting when its trend slope (or MA) is heading north and the strength of that trend is measurable (in Euler terms
) as directly proportional to its slope angle. Whether a horse was previously trending downward is only relevent to the current trend data in assessing the liklihood of its permanence. In the world of pre race trading the "now" is what we are trading (assuming we are not "long trading") and the trend cannot have more than one direction.
With respect to defining a trend it is also true that each person will have their own interpretation of whether 3 ticks or 10 ticks defines this movement as a trend. Not that it matters, if the trader can profit from his own definition.
Now you are introducing timescale into trend measurement and no current movement can be measured as both a drifter and a steamer. Using a long timescale such as a 200 MA will assess a series of trends, both upward and downward and present the information as a conglomerate macro view...almost totally useless for trading the now position. Of course the market can alter the direction of its trend, and frequently does, especially when it reaches the upper or lower limits of its true value.
A horse is drifting when its trend slope (or MA) is heading north and the strength of that trend is measurable (in Euler terms
) as directly proportional to its slope angle. Whether a horse was previously trending downward is only relevent to the current trend data in assessing the liklihood of its permanence. In the world of pre race trading the "now" is what we are trading (assuming we are not "long trading") and the trend cannot have more than one direction.Hi James
You might look at a horse that has drifted strongly and say 'This horse is drifting'. However, it is not possible that, before the market goes any further, the Mad Bomber will come along and take out 10 ticks, and the market will then start to steam?
The point I'm making is just that, as nobody knows for sure what will happen next, strictly speaking that's not an accurate statement, at least not without qualifying it with a word like 'probably' (even though I'd say it myself, as it would be clear what I meant!).
I guess it's a bit like saying 'Wood is solid', when a scientist might point out that, strictly speaking, that's not correct, as there are lots of spaces between the molecules!
Jeff
You might look at a horse that has drifted strongly and say 'This horse is drifting'. However, it is not possible that, before the market goes any further, the Mad Bomber will come along and take out 10 ticks, and the market will then start to steam?
The point I'm making is just that, as nobody knows for sure what will happen next, strictly speaking that's not an accurate statement, at least not without qualifying it with a word like 'probably' (even though I'd say it myself, as it would be clear what I meant!).
I guess it's a bit like saying 'Wood is solid', when a scientist might point out that, strictly speaking, that's not correct, as there are lots of spaces between the molecules!Jeff
James1st wrote: A horse is drifting when its trend slope (or MA) is heading north and the strength of that trend is measurable (in Euler terms
Of course Jeff, nothing in life or trading is certain but we all operate on predicting what is most likely to happen and in safeguarding ourselves if the opposite happens.
No one in their right mind would buy a house if they honestly thought that its value would continue to fall after purchase. History dictates that house prices have a "tendency" to rise and its based on that historical opinion that we are prepared to bet that they will rise in the future and so we buy.
The mad bomber, in my experience (and that experience tells me he isnt mad at all) causes market odds to fall by a significant number of ticks. Again based on experience the odds do recover to somewhere half of the drop. The mad bomber apart, there are not that many unpredictable events that cause a sudden turnaround with the most likely that a volume of money disagrees with the current odds.
If you are dealing in an uncertain world then you would be foolish not to protect yourself against unpredictable but known events.
No one in their right mind would buy a house if they honestly thought that its value would continue to fall after purchase. History dictates that house prices have a "tendency" to rise and its based on that historical opinion that we are prepared to bet that they will rise in the future and so we buy.
The mad bomber, in my experience (and that experience tells me he isnt mad at all) causes market odds to fall by a significant number of ticks. Again based on experience the odds do recover to somewhere half of the drop. The mad bomber apart, there are not that many unpredictable events that cause a sudden turnaround with the most likely that a volume of money disagrees with the current odds.
If you are dealing in an uncertain world then you would be foolish not to protect yourself against unpredictable but known events.
Being pedantic, they might if they thought there was a 60% chance it would fall by 10%, but a 40% chance that a bubble would form and that it would rise by 50%!James1st wrote: No one in their right mind would buy a house if they honestly thought that its value would continue to fall after purchase.
I agree.James1st wrote:If you are dealing in an uncertain world then you would be foolish not to protect yourself against unpredictable but known events.
In this interview, trading psychologist Mark Douglas compares successful trading to betting on a loaded coin, and talks about why some traders struggle to accept losses: http://www.youtube.com/watch?v=dkmbfMzR ... re=related
Jeff
Some more wisdom from Mr Seykota:
'Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.
I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.'
I think there's a lot of truth to that...
Jeff
'Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.
I think that if people look deeply enough into their trading patterns, they find that, on balance, including all their goals, they are really getting what they want, even though they may not understand it or want to admit it.'
I think there's a lot of truth to that...
Jeff