Category Archives: Trend following

Market Randomness Indicator

Posted on May 15, 2013 by Michael Harris

I have been looking for an indicator of market randomness for a long time and I believe I have now found a reliable one based on extensive backtesting results. The indicator shows when market activity is random and also when non-random … Continue reading →

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An Adaptive Long-term Trading System

Posted on May 7, 2013 by Michael Harris

This trend-following trading system is based on an algorithm that adapts to market conditions and it is significant at the 99.86% level in the case of SPY based on the performance results obtained from 20,000 simulations of a random system. There … Continue reading →

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The Golden Cross Trading System Lacks Intelligence

Posted on May 3, 2013 by Michael Harris

One of the main reasons I abandoned trend-following in the mid 1990s was the fact that I was not able to find a system for which the null hypothesis that it possessed no intelligence in pairing raw market returns with its signals could be rejected. … Continue reading →

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More Evidence That Equity Index Trend-Following Has Become Difficult

Posted on April 14, 2013 by Michael Harris

My recent post “Is There Any Future in Equity Index Trend-Following?” has generated a lot of interest and, as expected, some controversy. In this post I present more empirical evidence that equity index  trend-following has become more difficult in recent … Continue reading →

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Passive Investing in Stock Indices Involves Substantial Risks

Posted on April 8, 2013 by Michael Harris

I have heard a lot of arguments in favor or against active fund management and passive investing. I present data here that strongly suggest that passive investing in stock indices should be actually treated as an alternative investment that involves substantial risks, or … Continue reading →

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Trading Style and Age

Posted on April 7, 2013 by Michael Harris

Trading style and age are related to some extent. It is not a matter whether one can design and automate intraday medium frequency system but whether the constant research and updating that is required when involved with this trading timeframe can be … Continue reading →

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Is There Any Future in Equity Index Trend-Following?

Posted on April 3, 2013 by Michael Harris

The problem of trend following is fundamentally simple: choppy markets reduce the effectiveness of trend-following algorithms and shorter trend durations reduce their profitability. There is no need for a more sophisticated analysis. About 15 years ago I derived an equation that describes the problems … Continue reading →

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Systematic Stock Index Trend Followers Are An Easy Prey

Posted on October 25, 2012 by Michael Harris

The dynamics of stock indices have changed notably since the fall of 2008. Trend volatility has increased substantially. Systematic trend followers, i.e. fund managers and traders who employ mechanical systems that attempt to follow the trend have been unable to … Continue reading →

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Commodity Futures Trend-followers Should Adapt to New Market Realities

Posted on October 12, 2012 by Michael Harris

You can’t just trade the markets in 2012 with systems developed based on models conceived in the 1980s and 1990s. The markets have changed a lot since then. You can’t just rely on  traditional trend-following systems to catch trends. You have … Continue reading →

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Sustained Negative Correlation Bewteen Stock and Bond Returns is Problematic

Posted on January 12, 2012 by Michael Harris

Over the longer-term stock and bond returns show a small but positive correlation. Periods of sustained low negative correlation usually indicate increasing stock market uncertainty and risk. The 120-day rolling correlation between SPY and TLT has been on a downtrend since February of last … Continue reading →

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