Free Blog

Traders and analysts focus on recent price action, and often they may think there are irregularities. In most cases, historical analysis shows there is no deviation from normality, and the perception of irregularities is due to recency bias. Recency bias is ...

The ensemble of trend-following and mean-reversion strategies boosts the Sharpe ratio significantly due to a low correlation of returns and lower volatility of the ensemble. The trend-following and mean-reversion strategies are based on the same algo, the PSI5. The trend-following strategy ...

Gains in the US stock market from regular trading hours since January 2022 turned positive, while there are still significant losses from overnight changes. A regime change has occurred. In an article last month, I argued that the overnight effect is ...

A new subscription to Price Action Lab Blog is available for premium articles on trend-following. With a Trend-Following subscription, premium subscribers can access 17 articles on trend-following. Two of the articles include strategy rules: a trend-following strategy for small-cap stocks and ...

Trend-following parameter space is large and can result in excessive over-fitting in backtests, depending on the complexity of the strategy. This article is an introduction to this complex subject. Read the article with a Trend-Following subscription. 

The best anomaly detection signals have zero maximum adverse excursion, but they are rare. There is often a lag before the signal starts generating a profit. The Maximum Adverse Excursion (developed by John Sweeney), or MAE, is the maximum loss generated ...

The constant search for strategic allocations with optimal exposure to markets is a process indistinguishable from market timing and suffers from its biases. Asset allocators constantly search for the best mix of assets for diversification that offers a desirable Sharpe ratio. ...

Trading strategies evolve towards chaotic performance if no improvements are made that are compatible with changes in the market regime and microstructure. The financial markets are highly non-linear, dynamic, and stochastic processes. These types of random processes usually have many hidden ...

The overnight effect in US large caps is fading away after the publicity it received in the last three years and the issuance of ETFs to take advantage of it. Updated: January 31, 2023. There are numerous articles in this blog ...

In 2022, stocks (S&P 500 total return) fell 18.3% but managed futures (SG CTA Index) gained 19.3%. Managed futures celebrations are understandable after a long period of underperformance. Equity markets have also suffered from wide swings in the past. Read ...