Trend followers lose more often than they gain
AbstractWe solve exactly a simple model of trend following strategy, and obtain the analytical shape of the profit per trade distribution. This distribution is non trivial and has an option like, asymmetric structure. The degree of asymmetry depends continuously on the parameters of the strategy and on the volatility of the traded asset. While the average gain per trade is always exactly zero, the fraction f of winning trades decreases from f=1/2 for small volatility to f=0 for high volatility, showing that this winning probability does not give any information on the reliability of the strategy but is indicative of the trading style.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by arXiv.org in its series Papers with number physics/0508104.
Date of creation: Aug 2005
Date of revision:
Contact details of provider:
Web page: http://arxiv.org/
Other versions of this item:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Carl Chiarella & Giulia Iori & Josep Perello, 2007.
"The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows,"
- Chiarella, C. & Iori, G. & Perello, J., 2008. "The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows," Working Papers 08/04, Department of Economics, City University London.
- Carl Chiarella & Giulia Iori, 2005. "The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows," Research Paper Series 152, Quantitative Finance Research Centre, University of Technology, Sydney.
- Ted Theodosopoulos & Alex Trifunovic, 2006. "Hybrid dynamics for currency modeling," Papers math/0605457, arXiv.org.
- Scholz, Peter, 2012. "Size matters! How position sizing determines risk and return of technical timing strategies," CPQF Working Paper Series 31, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.