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My favorite trading strategy must fulfill eight criteria. In this article, I list the criteria and also briefly discuss my favorite trading strategy that meets them all. All traders do not have the same preferences for trading strategies, and these may ...

All investing and trading strategies can become chaotic and eventually cause high losses or ruin, but simpler ones can offer higher chances of longer periods of stability and profitability. The Curse of Dimensionality Richard E. Bellman, who invented dynamic programming, coined the ...

The skewness of trading strategies is an important statistic, but it makes sense when measured properly and analyzed in the proper context. What is skewness? Skewness is a measure of the symmetry of a distribution. If a distribution is normal, the skewness ...

A 9-sigma drop in the SG CTA index on March 13, 2022, coincided with a 10-sigma rise in the 2-year U.S. T-Note and caused significant losses to some managed futures CTAs. The SG CTA index is down about 5.3% year-to-date and ...

In a recent podcast, Clifford Asness, who cofounded AQR Capital Management,  mentioned three types of backtests, all quants should be aware of. The podcast was one of the best in quantitative finance and I highly recommend it. I will not say ...

Our strategy for CTA replication (REPA) does not rely on an index to replicate the performance. It is a bottom-up replication strategy instead of a top-down one. Most of the time, CTA replication strategies use statistical analysis or machine learning to ...

On Monday, March 13, 2023, managed futures CTAs faced a 9-sigma event and their worst losses since 2000. Edit on March 18, 2023, due to some comments in tweets: “The standard deviation formula is never wrong; it is what it is. What ...

Our CTA replication strategy is down 5.8% year-to-date, versus a 10.4% loss for the DBMF ETF and a 9.4% loss for the CTA ETF. The KMLM ETF is down 3.7% year-to-date. Our strategy (REPA) does not rely on an index to ...

Recent tail risk events and how fixed-income markets reacted to them have put pressure on managed futures replication. The S&P 1500 banking sector index has plunged 14% in the last two trading days (Friday, March 10, and Monday, March 13, 2023). As ...

The dual momentum strategy was described in papers and in a book published in 2013. Post-publication analysis shows a significant deterioration in performance. We attribute the performance deterioration to selection bias and regime changes. This article is along the lines of ...