Investigating a Simple Trend Idea - Part 1
Is This Trend System Worth The Hype?!?!
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Introduction:
The other day I was perusing the internet for some trading ideas for new systems. I tend to find lots of ideas laying around, but most don’t really pique my interest. The ideas I like the most are:
Simple in nature (simple tends to be more robust)
Based on real market phenomena
Are actually testable
Simple ideas are the best because they tend not to be fragile. Complex ideas on the other hand are extremely easy to curve fit and, in general, hard to test (have you ever tried to backtest a discressionary traders rules? You usually can’t, because there are 1,000 caveats!). Also, when a simple idea is based on some market effect that is proven, that’s even better.
That’s when I stumbled upon an idea that was so simple, I had to investigate it. The system was easily testable with only a few simple rules, and was based on a real market effect: momentum.
In this article let’s dive into the system. I want to attempt to replicate the results and then tear the system apart to better understand its innerworkings. Then, using what we learn about the system in this article, there will be a part two where we attempt to improve the system; where improvement can mean two things (and ideally means both):
To make more robust
To make have higher performance (though to make more robust is more important, higher performance should be the second goal after making a system more robust)
Anyway, let’s not get too in the weeds yet. Let’s jump into the system and try to code and understand it.
Replicating The Trend System:
So you can follow along, the link to where I found this system idea is listed below:
