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Investing with the Trend - A Rules-based Approach to Money Management.pdf
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Description
Investing with the Trend provides an abundance of evidence for adapting a rules-based approach to investing by offering something most avoid, and that is to answer the “why” one would do it this way. It explains the need to try to participate in the good markets and avoid the bad markets, with cash being considered an asset class. The book is in three primary sections and tries to leave no stone unturned in offering almost 40 years of experience in the markets.
Part I – The focus is on much of the misinformation in modern finance, the inappropriate use of Gaussian statistics, the faulty assumptions with Modern Portfolio Theory, and a host of other examples. The author attempts to explain each and offer justification for his often strong opinions.
Part II – After a lead chapter on the merits of technical analysis, the author offers detailed research into trend analysis, showing how to identify if a market is trending or not and how to measure it. Further research involves the concept of Drawdown, which the author adamantly states is a better measure of investor risk than the oft used and terribly wrong use of volatility as determined by standard deviation.
Part III – This is where he puts it all together and shows the reader all of the steps and details on how to create a rules-based trend following investment strategy. A solid disciplined strategy consists of three parts, a measure of what the market is actually doing, a set of rules and guidelines to tell you how to invest based upon that measurement, and the discipline to follow the strategyTable of Contents
Foreword ix
Preface xi
Acknowledgments xv
Chapter 1
Introduction 1
Part I: Market Fiction, Flaws, and Facts 13
Chapter 2
Fictions Told to Investors 15
Chapter 3
Flaws in Modern Financial Theory 27
Chapter 4
Misuse of Statistics and Other Controversial Practices 51
Chapter 5
The Illusion of Forecasting 57
Chapter 6
The Enemy in the Mirror 71
Chapter 7
Market Facts: Bull and Bear Markets 83
Chapter 8
Market Facts: Valuations, Returns, and Distributions 113
Part II: Market Research 139
Chapter 9
Why Technical Analysis? 141
Chapter 10
Market Trend Analysis 159
Chapter 11
Drawdown Analysis 231
Part III: Rules-Based Money Management 267
Chapter 12
Popular Indicators and Their Uses 269
Chapter 13
Measuring the Market 281
Chapter 14
Security Ranking, Selection, Rules, and Guidelines 319
Chapter 15
Putting It All Together: The “Dancing with the Trend” Model 355
Chapter 16
Putting Trend-Following to Work 391
Chapter 17
Conclusions 399
Appendix A: Passive versus Active Management 409
Appendix B: Trend Analysis Tables 413
Appendix C: Market Breadth 445
Appendix D: Recommended Reading 457
Bibliography 459
About the Author 467
About the Online Resources 469
Index 471
Author Information
Gregory L. Morris is Chairman of the Investment Committee for Stadion Money Management, LLC, which manages approximately $5.4 billion, and their Chief Technical Analyst. Prior to this role, Morris served as a trustee and advisor to the MurphyMorris ETF Fund and as treasurer and chief executive officer of MurphyMorris Money Management Co. and MurphyMorris.com. He has been a technical market analyst for over forty years, ranging from analysis software development and website analysis and education to money management. Morris is the author of two books,Candlestick Charting Explained and The Complete Guide to Market Breadth Indicators. He has appeared frequently on financial news shows, has lectured on technical analysis worldwide, and has been featured in major magazines. Morris was a U.S. Navy fighter pilot, is a graduate of the Navy Fighter Weapons "Top Gun" School, and holds a degree in aerospace engineering from the University of Texas.
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