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Has anyone actually seen first hand, a fully automated strategy (with no human intervention) using trend following/breakout (as opposed to mean reversion/random walk) that works?

(Last Updated On: September 10, 2011)

Has anyone actually seen first hand, a fully automated strategy (with no human intervention) using trend following/breakout (as opposed to mean reversion/random walk) that works?

This question has been troubling me over the last couple of weeks. There are a variety of reasons behind this but they all boil down to, when I have tried to describe such a system, somewhere human intervention creeps into my explanation.

In response to a post from someone asking how you could protect your ideas, I commented that in reality very few people want/need anyone else’s ideas; they usually have their own. What is difficult is all the research and coding it takes to turn an idea into a viable strategy.

To put my money where my mouth was, I offered an explanation of a working strategy (no code and no parameter values) to anyone who wanted one. I gave the choice of trend following, mean reversion or HFT. I got a lot of takers; way more than I expected.

The HFT and mean reversion ideas were straightforward and easy to articulate but I found when I was explaining the trend following/breakout strategies, they were never 100% automated.

I have been working with some colleagues on another such system for a hedge fund and there too, human intervention has crept in. Words like significant, unless and the dreaded “news event” all figured into the conversations.

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My knowledge of automated trading domain is fairly limited and don’t know retail traders with consistent profitability from automated trading trend/mean reversion. So I am also curious on this.

Any particular reason trend following require more discretion than mean reversion strategies? Is it because of things like trend stage context and open targets?

You can watch it run on your pc (free stuff) everyday:

http://www.datatime.eu/public/gbot/

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I believe the primary reason trend following requires more discretion is the choppy nature of trend direction changes. If you were to follow every signal in a choppy period, you will quickly give back all the profits (and more) you earned during the major trends.

Maybe most importantly, the market is truly trending only a small percentage of the time. Most of the estimates I have seen are in the 15% range.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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