Trend followers lose more often than they gain
We 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.
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Aug 2005|
|Contact details of provider:|| Postal: 6 boulevard Haussmann, 75009 Paris, FRANCE|
Web page: http://www.science-finance.fr/
More information through EDIRC