The Janus Factor E-Book

Gary Edwin Anderson

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Bloomberg Professional
• Sprache: Englisch

Seitenzahl: 167

Veröffentlichungsjahr: 2012

Beschreibung

Tap into feedback loops to unravel market trends and discover profitable trading opportunities The Janus Factor presents an innovative theory that describes how feedback loops determine market behavior. The book clearly shows how the theory can be applied to make trading more profitable. The metaphor of the two-faced god Janus is used to reflect alternating market environments, one dominated by trend followers and the other by contrarian bargain hunters. In this book, author Gary Anderson puts forth a systematic view of how positive and negative feedback drive capital flows in the stock market and how those flows tend to favor either sector leaders or sector laggards at different times. * Discusses how to find better performing stocks * Outlines when and how to use momentum strategies for big profits * Addresses when and how to use contrarian strategies * Gary Anderson is the winner of the 2003 Charles H. Dow Award, presented by the Market Technicians Association Intellectually challenging and highly practical, The Janus Factor offers insight into market behavior and new methods for capturing stock market trends.

Leseprobe

Contents

The Janus Factor

Introduction

Acknowledgments

Chapter 1: Foundations

Serendipity

The Data Set

Reasons and Causes

Befuddled

Which Way Is Up?

Notes

Chapter 2: The Assignment

Measuring Risk: Offense and Defense

Picturing Offense and Defense

The Benchmark Equivalence Line (BEL)

The Trend of Relative Performance

Notes

Chapter 3: Feedback and Capital Flow

Feedback

Feedback and Capital Flow

Calculating Relative Strength

The Relative Strength Spread

Trend Followers and Contrarians

Notes

Chapter 4: The Janus Factor

Structure and Entropy

Confidence

Is the Market Predictable?

Balancing Acts and Paradigm Shifts

Notes

Chapter 5: Seasons of Success

The Venturi Effect

The Relative Strength Spread and the Performance Spread

Group Studies

Notes

Chapter 6: Why Jesse Went Broke

The Cotton King

1911–1914

The Final Years

Notes

Chapter 7: Sheep Dogs and Other Contrarians

The Sheep Dog Effect

A Contrarian Hedge?

The Contrarian Rebound

The Contrarian Collapse

Notes

Chapter 8: Situational Awareness

Bielema’s Choice

The Bet

Let Us Calculate!

Notes

Chapter 9: The Direction of Momentum

Relative Momentum

Relative Momentum versus Relative Strength

Notes

Chapter 10: Long Strategies

The Critical Moving Average

The DOM Strategy

Contrarian Threats

A Defensive Long Strategy

It’s a Bull Market, You Know

Notes

Chapter 11: The Complete Strategy

Combined Long and Short Strategies

The Model Portfolio

Execution

Notes

Appendix

About the Author

Index

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Cover Design: C. Wallace

Cover Images: Roman Coin © Claudiodivizia/Dreamstime.com,

Golden Background © Vizualbyte/iStockphoto

Copyright © 2012 by Gary Edwin Anderson. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Anderson, Gary Edwin, 1942-

The Janus factor : trend follower’s guide to market dialectics / Gary Edwin Anderson.

p. cm.

Includes index.

ISBN 978-1-118-08707-7 (cloth); ISBN 978-1-118-23600-0 (ebk);

ISBN 978-1-118-26169-9 (ebk); ISBN 978-1-118-22348-2 (ebk)

1. Speculation. 2. Investment analysis. 3. Investments. I. Title.

HG6015.A526 1012

332.64—dc23

2012030690

For

Carol Anne

The Janus Factor

Ja’nus: Early Roman god of gates and portals, suggesting the two sides of a door. Represented by two opposing faces, Janus symbolizes the two-sided nature of things.

Introduction

In this Discourse I do not undertake to say all that is known, or may be said of it, but I undertake to acquaint the Reader with many things that are not usually known to every Angler; and I shall leave gleanings and observations enough to be made out of the experience of all that love and practise this recreation, to which I shall encourage them. For Angling may be said to be so like the Mathematicks, that it can never be fully learnt; at least not so fully, but that there will still be more new experiments left for the trial of other men that succeed us. But I think all that love this game may here learn something that may be worth their money, if they be not poor and needy men: and in case they be, I then wish them to forbear to buy it; for I write not to get money, but for pleasure, and this Discourse boasts of no more, for I hate to promise much, and deceive the Reader.

—Izaak Walton, The Compleat Angler, 1653

This book embraces both theory and craft. In the first five chapters, I present a systematic view of the market, not as a battle between buyers and sellers, or even between bulls and bears, but as a struggle for dominance by traders holding to radically opposed paradigms. A new measure of risk is offered, and on that theoretical foundation I build a method.

Craft confronts a real world of noisy data and thorny reality, so in the remaining six chapters I apply these methods to the historical record. In the final three I detail strategic indicators, which readers may use to guide day-to-day trading decisions.

Some of what I demonstrate is, so far as I know, taught nowhere else. The main ideas presented in this book are simple but crucial for anyone who wishes to trade successfully in all market environments.

Acknowledgments

Writing a book, I have come to learn, is a lonely pursuit, but a number of friends and colleagues cheered me along and some have contributed to the book’s content and finish.

First among those is my wife, Carol Anne. Her trust and support made it impossible for me to disappoint her. My friend and former business partner, Jack Loe, not only encouraged me, but his practical insights are sprinkled throughout the book.

There are others I wish to thank as well. Toni Turner is a successful author of books on trading, and from the beginning her natural optimism repeatedly refreshed me and my determination. I wish to thank Dr. Timothy Masters for his edits of technical issues, which have spared me from numerous small embarrassments. Nelson Freeburg lent his keen eye and broad knowledge of quantitative systems. David Aronson has been a friend of the project.

Finally, I wish to acknowledge those whose words and work I have borrowed freely.

To steal ideas from one person is plagiarism. To steal from many is research.

—Wilson Mizner, 1938

Chapter 1

Foundations

Every autobiography is the fragment of a theory.

—Leigh Gilmore, The Limits of Autobiography1

The young meteorologist started his computer run and walked down the hall for a cup of coffee. When he returned, the direction of both his life and his science had radically shifted. Ed Lorenz was experimenting with models of the weather on an early desk-sized computer. His research project called for him to input variables for atmospheric conditions and then let the computer grind out future weather patterns according to well-established algorithms based on meteorological laws. On this occasion, he decided to repeat an earlier computation in order to examine longer-term output in more detail. Normally, the computer ran these calculations from beginning to end in one take, but to save time Lorenz decided to start nearer to the point of his interest rather than to redo the entire run. As initial conditions he typed in a line of numbers printed midway during an earlier computation, started the program, and left the room. His coffee break lasted about an hour.