Following the Trend, 2nd Edition

CHAPTER 8Systematic Trading Without Time Series

Much of this second edition is quite similar to the original 2013 release. The data and performance are updated, the trading rules streamlined and commentary is added. Those are all things that are expected from a second edition of this kind. But I also want to be sure to add something new and unique, something which may surprise the reader and add unexpected value. So in this chapter, I will demonstrate a method which complements trend following well, a method which uses very different types of inputs and hopefully will help open readers' eyes to brand new ways of approaching the markets.

That's right. Here, at this late stage of the book, I'm going to throw out perhaps the most valuable gem in this book, now that we've shaken out those who did not have the attention span to get through the year‐by‐year Chapter 6.

Practically all systematic trading models, regardless of style or asset class, use price time series in one way or another. After all, it's hard to imagine what we could do without time series. Trend analysis, for instance, relies completely on such series. Whether you're trying to follow trends or buy a dip, the knowledge of how the price moved in the recent past is a vital piece of information. You can't know that the market dipped without knowing what it did last week and last month, and you can't follow trends without the same information.

In this chapter, I will demonstrate how a complete trading model can be built ...