V.10:7 (309-312): Back to Basics With Quantitative Analysis by Anthony J. Macek
Product Description
Back to Basics With Quantitative Analysis
by Anthony J. Macek
Ever notice how we seem to want to do things the hard way? Anthony Macek, publisher of the "Just the Facts" newsletter, has, and he's proposed a solution to simplify our lives using quantitative analysis. Here, Macek uses a technique of combining momentum and trend data to rate the condition of the market. Take a look.
Developing an infatuation with complex formulas and intricate analyses can cause us to lose sight of what we are striving to attain. If we are not careful, we can find ourselves afflicted with paralysis by overanalysis. Many persuasive arguments exist for examining our world in a less complex fashion. In doing so, the larger picture becomes clearer, and phenomena previously overlooked, such as trend and momentum, become more evident.
Simply stated, trend is defined as the tendency of a phenomenon to continue in its current path or direction. In essence, it measures the internal dynamics of a particular area under study. Momentum, a measure of price change over a series of prices, is directly related to the trend in that it relies on the same criteria. Because momentum is an indicator that gauges the strength of the trend, however, it is slower to react to new data and is therefore considered to be a longer-term indicator.
Examining trend and momentum can be simple or complex. In my experience, after years of number crunching using various computer models, employing countless variations of exponential and other weighted moving averages, using measures of relative strength, oscillators, stochastics, and so forth, I discovered that there was no great statistical advantage to using more complex means of measuring various phenomena. That is not to say that the use of more complex methods of analysis does not produce superior results; but the slight statistical advantage gained using more complicated methods would have to be evaluated in relation to the time spent in the process. Choosing a less elaborate method may not only be more time effective, but it may also be more than adequate to achieve the ultimate goal: more timely and better-informed investment decisions.
Ever notice how we seem to want to do things the hard way? Anthony Macek, publisher of the "Just the Facts" newsletter, has, and he's proposed a solution to simplify our lives using quantitative analysis. Here, Macek uses a technique of combining momentum and trend data to rate the condition of the market. Take a look.
Developing an infatuation with complex formulas and intricate analyses can cause us to lose sight of what we are striving to attain. If we are not careful, we can find ourselves afflicted with paralysis by overanalysis. Many persuasive arguments exist for examining our world in a less complex fashion. In doing so, the larger picture becomes clearer, and phenomena previously overlooked, such as trend and momentum, become more evident.
Simply stated, trend is defined as the tendency of a phenomenon to continue in its current path or direction. In essence, it measures the internal dynamics of a particular area under study. Momentum, a measure of price change over a series of prices, is directly related to the trend in that it relies on the same criteria. Because momentum is an indicator that gauges the strength of the trend, however, it is slower to react to new data and is therefore considered to be a longer-term indicator.
Examining trend and momentum can be simple or complex. In my experience, after years of number crunching using various computer models, employing countless variations of exponential and other weighted moving averages, using measures of relative strength, oscillators, stochastics, and so forth, I discovered that there was no great statistical advantage to using more complex means of measuring various phenomena. That is not to say that the use of more complex methods of analysis does not produce superior results; but the slight statistical advantage gained using more complicated methods would have to be evaluated in relation to the time spent in the process. Choosing a less elaborate method may not only be more time effective, but it may also be more than adequate to achieve the ultimate goal: more timely and better-informed investment decisions.
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