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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: chainik who wrote (46995)	12/10/2005 2:25:57 PM
From: Douglas M. Benedict	Read Replies (2) of 110194

"you can't tell a trend change from a correction until well after the fact". This statement, though it seems self evident, and apparently correct... is actually the root of most confusion... In any series...the 1 incident that is opposite to the preceding incidents is a change in trend...("temporal unit") The problem is in defining the "TREND" one is talking about... for example...you are driving through town and you hit a series of green lights...a trend...until you hit a red one...is the trend over??? or are you measuring it by 2 blocks of green??? 3 blocks of green lights...??? or is it ok to have the occasional red light amongst 3 blocks??? Likewise...are you measuring "TREND"s in minutes, hours, days, weeks, months, years, decades, centuries, ad infinitum...(or moving average units..which requires allowing for volatility) I would beg to say that one of the longest trends I know of is that the sun rises in the East...has been doing so daily and from what I have been led to believe, this has always been the case...but woe be the day it ceases... But I also know that summer trends end regularly...plus or minus a few days on average... It doesn't take me long to realize that one... So, in reality...how we react to a trend has to be based on what our parameters are...and I believe the problem is most people are defining trends by different parameters...thus the anguish... It isn't about being right...it's about applying a set of rules successfully...and if taking on risk...calculating in advance how one will react to running that one RED light...you never know what Garbage Truck may be speeding down the crossroad... ;) Besides..getting the Best series of Green lights doesn't guarantee one will get through town without being hit by someone running a red...thus you don't bet it all in case REFCO shuts down on your winning hand... Games of chance like Baccarat can be extended to Point and Figure charts...but I doubt the fact that a BANKER/PLAYER ceased a streak at 8 wins 25 decks back guarantees he will cease the current streak accordingly...regardless of laws of probabilities...However, again it only takes one temporal unit to change that fact...and not well after the fact...

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