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Trends & Market Structure

Is the Market Trending

A trend strategy has an edge about fifteen percent of the time and roughly none for the rest. This paper gives you one arithmetic test — twenty numbers off the chart, no indicator — that separates the two, measured across six instruments and eleven years, plus the uncomfortable finding about what to do the rest of the time.

Difficulty
Intermediate
Reading time
8 min
Pages
9

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The skill

Two people look at the same chart and one of them sees a trend. That gap is where most of the damage happens, because a trend strategy run in the wrong conditions does not fail dramatically — it bleeds, in a way that looks like bad luck. Here is the test that closes it.

Step one — do it on a trending chart

Take the last twenty closes. Measure how far price finished from where it started, then how far it walked to get there — every step from one close to the next, added up as positive numbers. Divide.

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