-
[QUOTE=aly;12947]So, regarding time, I guess it's a question of how often markets are trending vs. range-bound. Based on your experience and knowledge, what would you say this is? I've heard some say the market is trending 1/3 of the time and range-bound 2/3 of the time. Is this true?[/QUOTE]
The market is not typically range bound, or flat, this much of the time. A way I've found to test this is to determine peak and trough dates combined with periods of time when the movement up and down is within a range of three percent either way. In other words, when the movement is very minor this reflects a range-bound, or flat, market that is pretty much going nowhere.
The actual percentage of time in a flat market all depends on what you require the bull and bear trending market moves to be. The following table shows a move anywhere from 7% to 20%. The date range for this on the S&P 500 is 1970 to present.
[IMG]http://i1083.photobucket.com/albums/j399/john_jacobs1/Bull-Bear-Flat-1970-2011.png[/IMG]
So for 20% trend-moves in the S&P 500 the amount of time in a range-bound market is 24.91%. When you drop this to 7% the time in a flat market moves down to 18.97%. If you average all four you end up with 22.40%.
This is the same thing but for the periods from 2000 to present:
[IMG]http://i1083.photobucket.com/albums/j399/john_jacobs1/Bull-Bear-Flat-2000-2011.png[/IMG]
The average of all four is 22.15%. So it is pretty clear that the last eleven years have not been all that much different than the longer period of 1970-2011.
-
[QUOTE=John.Jacobs.EV;12958]The market is not typically range bound, or flat, this much of the time. A way I've found to test this is to determine peak and trough dates combined with periods of time when the movement up and down is within a range of three percent either way. In other words, when the movement is very minor this reflects a range-bound, or flat, market that is pretty much going nowhere.
The actual percentage of time in a flat market all depends on what you require the bull and bear trending market moves to be. The following table shows a move anywhere from 7% to 20%. The date range for this on the S&P 500 is 1970 to present.
[IMG]http://i1083.photobucket.com/albums/j399/john_jacobs1/Bull-Bear-Flat-1970-2011.png[/IMG]
So for 20% trend-moves in the S&P 500 the amount of time in a range-bound market is 24.91%. When you drop this to 7% the time in a flat market moves down to 18.97%. If you average all four you end up with 22.40%.
This is the same thing but for the periods from 2000 to present:
[IMG]http://i1083.photobucket.com/albums/j399/john_jacobs1/Bull-Bear-Flat-2000-2011.png[/IMG]
The average of all four is 22.15%. So it is pretty clear that the last eleven years have not been all that much different than the longer period of 1970-2011.[/QUOTE]
Thanks for sharing that. Excellent work.
FWIW, I did a similar study today using different criteria (a number of methods to measure how often the market is in a clear bull trend or clear bear trend). I found that for 2000-2010, the SPX was in a clear bull or clear bear trend (i.e. not a flat market) 74% of the time - meaning it was range-bound 26% of the time.
Pretty close to your numbers!
-
[QUOTE=Billy;12950]Aly,
I've heard and read for years the same 2/3 and 1/3 proportion.
But it all really depends on the timeframe you're looking at. I know traders in this forum who deem a 1-hour trend an eternity and others who are only looking at monthly trends!
For the robot, ST is a 3-day horizon and LT is a 10-day horizon. It seems to be the best timeframe compromises for optimizing what we are trying to achieve: consistent compounded (very) long term risk-adjusted returns.
I suggest that you explore the Market Sci blog archives for their posts about research on mean-reversion and trend-following markets. They were big promoters of mean-reversion strategies until they discovered that for the last few years a shift clearly happened in favor of trend-following strategies. They explain why they think this phenomenon can only accelerate in the years ahead.
I think also that modern algo and HFT trading can only precipitate more trend-following.
Billy[/QUOTE]
Thanks for the tips, Billy.
Will take a look at those archives and ponder on your thoughts as well.
-
Pascal,
Could you tell me the gain/loss of the 20DMF short trade initiated on May 5th (the last Excel file I have shows it as open). Also, would it be possible to put an updated 20DMF Excel trade file on the site so it's easily accessible?
Thanks again,
Adam
-
1 Attachment(s)
[QUOTE=adam ali;14238]Pascal,
Could you tell me the gain/loss of the 20DMF short trade initiated on May 5th (the last Excel file I have shows it as open). Also, would it be possible to put an updated 20DMF Excel trade file on the site so it's easily accessible?
Thanks again,
Adam[/QUOTE]
Attached.
Pascal
[ATTACH]9159[/ATTACH]