Why ... Trend Identification?
Ed Seykota, is a legendary Wall Street pioneer in systems development during the 1970s, and was a trading coach at Commodities Corporation during my tenure there in the 1990s. According to Ed:
Many good systems are based on following trends. Life itself is based on trends. Birds head south for the winter and keep on going. Companies track trends and alter their products accordingly. Tiny protozoa move in trends along chemical and luminescence gradients.
After trading and watching great traders for more than 20 years, there is no doubt in my mind that the majority of profits have come when markets are trending. In fact, this truism is even more evident when a market is trending within numerous time frames. The most advantageous risk-reward dynamics exist when a market is trending on an intraday, daily, weekly, and monthly basis.
The reality is that markets spend their least percentage of the time trending. This is even more true today, thanks to technological advances and the global instantaneous access to news and data. The availability of instant data and information causes shorter-term, more violent price adjustments, meaning that markets spend less time trending on a longer-term basis.
Nonetheless, trends remain an inherent part of market movement. “Selective aggression” becomes a catch phrase, and the catalyst for the development of a trend-momentum based investment-trading methodology.
I have been playing poker for years. I started ...