5 Minute Bar or Weekly Bar: The Same Thing! Not Exactly the Same

Consider as a foundation to this post:

“The window on analysis is shrinking. People are moving so fast now that they don’t have time to think. They’re scanning, swiping, clicking, liking, tweeting and moving on at full velocity. They’re making decisions based on feelings, not facts. They are often choosing not because of what they think, but because of how something makes them feel.”

So, I was having a conversation with a guy online. A video out there had made the declarative statement that good trading was about switching between time frames: 5 minute bar to weekly bar to whatever. The video implied it’s all about switching. I said to this guy: “It sounds plausible to switch from 5 minute to weekly bar?” He offered:

Let’s say my trading approach is to trade when a particular technical pattern appears. Is it not plausible that I might look on a number of timescales to find instances of that pattern (either manually or getting a computer to do the spade work)?…However, personally I don’t think that published stats are the be all and end all [made in response to my call for empirical data]. For example, if someone who seems plausible tells me that they have traded the (say) the five minute chart using a particular method and made a profit over thousands of trades, I regard that as evidence. Also, I’m more interested in the theoretical underpinnings of a methodology than the empirical evidence, given that markets change and are designed to remove edges over time.

Try to make a system out of those feelings. Try to code those feelings. This inane interchange brought to mind a great line from Graham Greene’s The Quiet American:

“He was impregnably armored by his good intentions and his ignorance.”

Indeed. A failure to communicate:

The communication impasse is deep and goes beyond my simple exchange with this guy:

Note: The clarion call to rally against my meanness, rudeness and disrespect are sure to follow. Oh, you say, “Where is your evidence, where is your detail?” Try here and here.

3 thoughts on “5 Minute Bar or Weekly Bar: The Same Thing! Not Exactly the Same

  1. Ed Seykota was recently asked in his forum:

    “I am new to trend following and wish to ask you what your favorite chart is for determining a given market’s trend? Daily, Weekly, Yearly, Hourly?”

    Ed responded:

    “Hmmm…your list seems to lack scaling options for minute, second, and millisecond. If you want to go for the really high frequency stuff, you might try trading visible light, in the range of one cycle per 10-15 seconds. Trading gamma rays, at around one cycle per 10-20 seconds, requires a lot of expensive instrumentation, whereas you can trade visible light “by eye.” I don’t know of even one short-term trader, however, who claims to show a profit at these frequencies. In general, higher frequency trading succumbs to declining profit potential against non-declining transaction costs. You might consider trading a chart with a long enough time scale that transaction costs are a minor factor – something like a daily price chart, going back a year or two.”

    I agree with Ed’s pithy wisdom, but he is not saying short term is impossible.

    There do exist shorter term systematic traders who have done quite well (Toby Crabel, Jim Simons). They would agree with Ed that their style is hard. The shorter you go the more you need great execution, fantastic data and multiple systems. To be a great shorter term mechanical trader is a different animal than trend following, but it is a style that a select few have mastered.

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