Tag Archives: trend following

Adaptive Trend-following Using the Randomness Index Indicator

Posted on May 16, 2013 by Michael Harris

The Randomness Index was introduced yesterday in another post. The value of this indicator is calculated for any set period using the closing prices. Under normal conditions the indicator swings between +100 and -100 although values beyond those extremes are also possible. Values between +10 … Continue reading →

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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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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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The Four Market Shocks

Posted on April 27, 2013 by Michael Harris

In the last 63 years there have been four major shocks after which volatility increased substantially. The last shock due to the financial crisis caused a volatility increase to new highs marking an alarming trend for the future. The increased volatility and … Continue reading →

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The Probability of a Market Correction Has Increased

Posted on April 24, 2013 by Michael Harris

Each day the uptrend that was signaled in SPY by the 50-200 SMA cross on January 23, 2012, continues the probability of a correction is getting higher. Actually, the average trend duration of the two previous uptrends of the same cross was … 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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The Causes of this Rally Are Not Important

Posted on March 6, 2013 by Michael Harris

There are many articles in the blogosphere about the cause(s) of this rally, whether it is real or fake, whether this is a bubble market fueled by quantitative easing or a move based on underline value. Causes can never be … Continue reading →

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Several Months of Sideways Volatile Action is What May Lie Ahead

Posted on February 21, 2013 by Michael Harris

The market has been moving sideways for the past few weeks. Action in DIA has been confined inside a 1.5% flat channel for the past 17 days, something that has never occurred before. Confinment inside a 2% channel has occured twice in 2005 and … Continue reading →

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The Main Cause of Failure of Some Popular Technical Trading Methods

Posted on December 21, 2012 by Michael Harris

Indicator based trend following and classical chart patterns are two trading methods that were developed in mid 20th century using data from the equity markets mainly and worked well during an extended period of time in those markets due to the presence of autocorrelation. After 1998 things … Continue reading →

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There is no Evidence that Counter-Trend Trading is Viable

Posted on November 7, 2012 by Michael Harris

Trend-following is a very popular trading method employed by funds, longer-term investors and even mechanical and discretionary traders. This method of trading is compatible with common sense and its success has been verified in practice by multi-year performance records showing exceptional … Continue reading →

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