For the past three years we all have heard the hammer striking the nails into the coffin of trend following and we are now waiting for that final strike driving in the last remaining nail. Will someone grab the mortician’s arm before his last arcing swing down?
Well this post might not stop the arm but it might cause the hammer to miss its final target. If trend following is dead then shouldn’t counter trend trading be approaching adulthood?
In the process of answering these questions we will need a contender from each camp to battle. The winner will either strike the last nail or throw the hammer away (temporarily of course.) The fighters will battle three rounds: Gold, T. Notes, and e-Minis.
Trend Following contender:
Name: Simple Turtle
Specs: 40 day Donchian Entry and 20 day Donchian Exit
Counter Trend contender:
Name: Turtle Soup
Specs: 20 day Donchian with 4 bar delay and 20 Donchian Exit
Round 1 Gold: 10 Year Test Period – no commission/slippage
Winner of Round #1: Trend Following
Round 2 Notes: 10 Year Test Period – no commission/slippage
Winner of Round #2: Counter Trend
Round 3 e-minis: 10 Year Test Period – no commission/slippage
Winner of Round #3: Tie – Neither
So here we go again – a post concerning trend following without a decisive answer.
I think this will need a much deeper analysis. Stay tuned for some more testing and observations. I want to work with the parameters on both systems and then also utilize TradeStation’s newer Genetic Optimization tool.
Published by: George Pruitt, Director of Research