PS....In scaling back and taking a helicopter view on the markets to see what edge you are working with you realise that timeframe does actually matter. Remember that a monthly chart is simply a composite of a W1 chart, a D1 chart, an H4 chart, an H1 chart, a M30 chart....an M5 chart etc. etc. etc. You will not see this fine edge displayed in an M1 chart. There is simply too much noise in it.
If the market was unbounded where there was no end to the lowest timeframe we could go...or the highest timeframe we could go.....then our assumption that the longer term holds more opportunity for trend following would not be rigorous. Fortunately our markets are bounded at the lowest timeframe and open ended on the highest timeframe. At the lowest timeframe we only have a small number of participants interacting continuously. The HFT guys dominate. As we step up in timeframe, a greater population of participants interact including speculators, commercial hedgers, banks and investors. This results in randomness at the lowest timeframes turning into order at the highest timeframes. These interactions tend to cancel out different opinions as we step up to larger timeframes where the winners of this competitive battle are expressed.
Whatever segment you attack on M5 does not infer that it is representative of the longer term edge you see over the 30 year to 50 year timeframe etc. An edge is something that only is revealed by the Law of Large numbers. We might assume that we have an edge trading the M5 timeframe....but over the long term it is a fools fallacy. :-)
The global macro fundamentals like interest rates that are causative factors which drive long term market direction are long term in playing out....not short term. Consumer sentiment and expectation is what is short term and is what predictors focus on. We speculators (that are a very small % of the market) are like pirahnas biting on alpha....but have a very small impact on the scheme of general price movement long term. It is only when the markets ***t themselves during abnormal booms and busts, that all participants including the central banks...take a form of more coordinated action that literally drive the long term direction of price movement. That is when the non predictive trend follower blossoms. The rest of the time....it is a gambling house for speculators or a means to transact at fair value for non-speculators (aka a market).
If the market was unbounded where there was no end to the lowest timeframe we could go...or the highest timeframe we could go.....then our assumption that the longer term holds more opportunity for trend following would not be rigorous. Fortunately our markets are bounded at the lowest timeframe and open ended on the highest timeframe. At the lowest timeframe we only have a small number of participants interacting continuously. The HFT guys dominate. As we step up in timeframe, a greater population of participants interact including speculators, commercial hedgers, banks and investors. This results in randomness at the lowest timeframes turning into order at the highest timeframes. These interactions tend to cancel out different opinions as we step up to larger timeframes where the winners of this competitive battle are expressed.
Whatever segment you attack on M5 does not infer that it is representative of the longer term edge you see over the 30 year to 50 year timeframe etc. An edge is something that only is revealed by the Law of Large numbers. We might assume that we have an edge trading the M5 timeframe....but over the long term it is a fools fallacy. :-)
The global macro fundamentals like interest rates that are causative factors which drive long term market direction are long term in playing out....not short term. Consumer sentiment and expectation is what is short term and is what predictors focus on. We speculators (that are a very small % of the market) are like pirahnas biting on alpha....but have a very small impact on the scheme of general price movement long term. It is only when the markets ***t themselves during abnormal booms and busts, that all participants including the central banks...take a form of more coordinated action that literally drive the long term direction of price movement. That is when the non predictive trend follower blossoms. The rest of the time....it is a gambling house for speculators or a means to transact at fair value for non-speculators (aka a market).
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