How Market Noise Affects Trend-Following Trading Systems | Whipsaws

Trend-following trading systems generally work well against markets where noise is relatively low. However, when market noise increases, this can reduce the effectiveness due to whipsaws. This video explains why this is, making it possible to plan how to improve the profitability of these types of trading strategies.

The question of why trend-following strategies worked better in the past is also considered.

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This is Episode 83 in the Darwinex 'Algo Trading for a Living' Playlist, and Episode 3 of the 'Market Noise' mini-series.

Video Contents:
00:00 Introduction
02:19 Why is market noise problematic to trend-following systems?
04:02 Whipsaw Example
05:25 Why did trend-following work better in the past?
06:39 Next Episode - Mean-reversion strategies and noise
06:52 Summary

Content Disclaimer: Past performance is not a reliable indicator of future results. The contents of this video (and all other videos by the presenter) are for educational purposes only and are not to be construed as financial and/or investment advice.

[gracia]

Woow thanks a lot !! greatly illustrated !

[jiaoyizhidao]

HI Martyn, will you do a mini sierie on how you develop your strategy?? i would love to see that!

[gadeichhorn]

interesting to see where you going with this :) I normally used spread but am keen to learn a new trick.

[ozenccetin]

looking forward to listening your next episode soon and have some ideas to handle with whipsaws :) already thanks

[eTaupe]

Great as usual
Can't wait for th next episode

Are you going to talk about Efficiency ratio to assess the instrument noise before chosing a strategy type or using oscillators to enhance trend following metrics ?

[mithrandir]

I've noticed heikin-ashi candles tend to filter out some noise although they have to be paired with volume specific indicators to be more accurate.

[OneCreator]

Just reverse ma crosses, they work great this way.