Dancing with the Trend

Building a Rules-Based Trend Following Model - 13

by Greg Morris

I may seem to be wandering around when it comes to this series on model building, but I think that keeps the interest a little higher; maybe not.  Rules and guidelines are a critical element to a good trend following model; in fact, any type of model.  Once you have the weight of the evidence measures telling you what the market is currently doing, the rules and guidelines provide the necessary process on how to invest based upon those measures.  If there was a simple answer as to why they are necessary, it is to invoke an objective approach, one that does as much as Read More 

Dancing with the Trend

Building a Rules-Based Trend Following Model - 12

by Greg Morris

I’m going to return to discuss the final part of my Weight of the Evidence.  As a reminder this is a collection of price and breadth measures designed to tell me if the Nasdaq Composite is in an uptrend or not. You might want to review some of the past articles in this series as I’m going to try to not repeat unless necessary for clarity. The model uses a basket of technical measures to determine the overall risk levels in the market as defined by the Nasdaq Composite Index. The model has been constructed so that each technical measure carries a specified weight based upon extensive Read More 

Dancing with the Trend

Fear and Greed

by Greg Morris

I cannot tell you the number of times an investor has asked, “Considering the difficulties of the past few months, do you still believe in your investment process?”  These questions always concerned me because I never once considered not believing in my process for managing money just because of short-term whipsaws and volatility.  I have written often, maybe too often, that the single most important trait to have for the long-term success of my process was discipline.  You must have discipline to stick with your strategy during the inevitable periods when the results are Read More 

Dancing with the Trend

Markets do Trend!

by Greg Morris

For the last couple of decades, I have classified myself as a trend follower.  Mind you, this is not market timing.  Market timing involves guessing at tops and bottoms.  A trend follower will NEVER get in at the bottom or out at the top.  It depends on how quickly his/her trend measures identify a trend that determines when to go long after a bottom and exit after a top.  I need to quickly clarify that I do not participate in the downside, only long positions, with cash being such a position in down markets.  Why double the risk of whipsaws? Read More