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I extend the impossible trilemma concept from economics to trend-following: It is impossible to have a high annualized return, a high win rate, and a low drawdown at the same time. I call this trend-following Trilemma (© Price Action Lab ...

Bitcoin delivered spectacular returns during its early days, when prices were low. Any hopes of similar returns in the future underestimate how unrealistic prices must become. Bitcoin speculation is on a path of diminishing returns. Spectacular annual returns were realized during ...

A positive skew of strategies does not guarantee anything, and it can even be undesirable under specific market regimes. As I have written before, marketing has taken a few statistical notions and mixed them into narratives in support of certain financial ...

I show in the article that it does not matter whether returns or first differences are used when calculating correlations. The general perception is that when calculating Pearson’s correlation, one must use returns rather than first differences. Some quants also argue ...

Growth stocks have surged year to date, while momentum and value stocks are lagging with significant underperformance. Our long-short factor rotation strategy is slightly down year-to-date. After plunging last year, growth stocks are the stellar performers year-to-date, while momentum and value ...

Here is the long-term and year-to-date performance of the five trading strategies included in a bundle. There are seven strategies in the bundle, five main and two that are offered as a bonus. Strategy Description Markets Price MRETF Mean-reversion/breakouts Long-only SPY, QQQ, TLT Bundle MRETFLS Mean-reversion/breakouts Long-short SPY, QQQ, TLT Bundle B2S2 Mean-reversion Long-only Dow 30 ...

There have been two post-war periods in the US stock market with sideways action for about twelve and a half years and large drawdowns from all-time highs. Is another such period possible? The two worst post-war periods in the US stock ...

This is a simple strategy for trading Russell 3000 stocks short-only. The strategy has a high Sharpe ratio. Update: This article was updated on December 29, 2023. For all backtests in this article, we used Norgate data for the Russell 3000 index, ...

Artificial Intelligence (AI) ETFs have underperformed so far as compared to large-cap and tech stocks. The performance since inception has been disappointing, and the drawdowns from all-time highs have been large. Below is a list of seven AI ETFs showing the ...

Whether the allocation is strategic or tactical, the optimal weights of the assets depend on past data. Optimality breaks down when there are regime changes. Optimal asset allocation depends on several factors besides the obvious one, which is the choice of ...