Book description
Investing with the Trend provides an abundance of evidence for adapting a rules-based approach to investing by offering something most avoid, and that is to answer the "why" one would do it this way. It explains the need to try to participate in the good markets and avoid the bad markets, with cash being considered an asset class. The book is in three primary sections and tries to leave no stone unturned in offering almost 40 years of experience in the markets.
Part I - The focus is on much of the misinformation in modern finance, the inappropriate use of Gaussian statistics, the faulty assumptions with Modern Portfolio Theory, and a host of other examples. The author attempts to explain each and offer justification for his often strong opinions.
Part II - After a lead chapter on the merits of technical analysis, the author offers detailed research into trend analysis, showing how to identify if a market is trending or not and how to measure it. Further research involves the concept of Drawdown, which the author adamantly states is a better measure of investor risk than the oft used and terribly wrong use of volatility as determined by standard deviation.
Part III - This is where he puts it all together and shows the reader all of the steps and details on how to create a rules-based trend following investment strategy. A solid disciplined strategy consists of three parts, a measure of what the market is actually doing, a set of rules and guidelines to tell you how to invest based upon that measurement, and the discipline to follow the strategy
Table of contents
- Foreword
- Preface
- Acknowledgments
-
Part I: Market Fiction, Flaws, and Facts
- Chapter 2: Fictions Told to Investors
-
Chapter 3: Flaws in Modern Financial Theory
- What Modern Portfolio Theory Forgot or Ignored
- Modern Portfolio Theory and the Bell Curve
- Standard Deviation (Sigma) and Its Shortcomings
- Improper Process
- High Sigma Days We All Remember
- Rolling Returns and Gaussian Statistics
- Risk and Uncertainty
- Back to the Original Question: Is Volatility Risk?
- Is Linear Analysis Good Enough?
- Linear Regression Must Have Correlation
- The 60/40 Myth Exposed
- Discounted Cash Flow Model
- Chapter 4: Misuse of Statistics and Other Controversial Practices
- Chapter 5: The Illusion of Forecasting
- Chapter 6: The Enemy in the Mirror
- Chapter 7: Market Facts: Bull and Bear Markets
- Chapter 8: Market Facts: Valuations, Returns, and Distributions
-
Part II: Market Research
- Chapter 9: Why Technical Analysis?
- Chapter 10: Market Trend Analysis
-
Chapter 11: Drawdown Analysis
- What Is Drawdown?
- Drawdown Terminology
- The Mathematics of Drawdown and Equivalent Return
- Cumulative Drawdown
- S&P 500 Drawdown Analysis
- S&P Total Return Analysis
- Dow Jones Industrial Average Drawdown Analysis
- Dow Industrials Total Return Analysis
- Gold Drawdown
- Japan’s Nikkei 225 Drawdown
- Copper Drawdown
- Drawdown Intensity Evaluator (DIE)
-
Part III: Rules-Based Money Management
- Chapter 12: Popular Indicators and Their Uses
-
Chapter 13: Measuring the Market
- Weight of the Evidence Measures
- A Note on Optimization
- Indicator Evaluation Periods
- Price-Based Indicators
- Breadth-Based Indicators
- Slope of Moving Average
- World Market Climate
- Cyclical Market Measure
- Relative Strength
- Dominant Index
- Trend Capturing Measure
- LTM—Long-Term Measure
- Bull Market Confirmation Measure
- Initial Trend Measures (ITM)
- Trend Gauge
- Chapter 14: Security Ranking, Selection, Rules, and Guidelines
-
Chapter 15: Putting It All Together: The “Dancing with the Trend” Model
- Weight of the Evidence
- Investing with the Weight of the Evidence
- Ranking and Selection
- Discipline
- Sell Criteria
- Tweaking the Model
- Model in Action
- Risk Statistics, Ratios, Stops, Whipsaws, and Miscellaneous
- Mutual Fund Expenses
- Turnover and Taxes
- Watching a Tactical Strategy over the Short Term
- Benchmarking
- Full Cycle Analysis
- Actual Results from a Rules-Based Trend-Following Strategy—Dancing with the Trend
- Mean Shifting
- Chapter 16: Putting Trend-Following to Work
- Chapter 17: Conclusions
- Appendix A: Passive versus Active Management
- Appendix B: Trend Analysis Tables
- Appendix C: Market Breadth
- Appendix D: Recommended Reading
- Bibliography
- About the Author
- About the Online Resources
- Index
- End User License Agreement
Product information
- Title: Investing with the Trend: A Rules-based Approach to Money Management
- Author(s):
- Release date: December 2013
- Publisher(s): Wiley
- ISBN: 9781118508374
You might also like
book
Following the Trend: Diversified Managed Futures Trading
During bull and bear markets, there is a group of hedge funds and professional traders which …
book
The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk
A proven approach to trading success based on the best commodity trading advisors Profiting from long-term …
book
Kirkpatrick’s Investment and Trading Strategies: Tools and Techniques for Profitable Trend Following
Choosing Stocks and Timing Buy and Sell Decisions: Trend-Based, Evidence-Driven Strategies That Work What to do, …
book
The Successful Trader's Guide to Money Management
Discover how to maximize the effectiveness of your trading techniques by applying the right money management …