- Increasing the length of Price Patterns in Short-Term Trading November 30, 2014
The optimum length of short-term price action patterns used to generate entry and exit signals depends on market conditions and cannot be determined in advance. It often pays to use a mix of patterns that respond to different market conditions. In short-term trading there ...
- Long/Short Symmetry Effect on Trading System Performance November 9, 2014
Although some quants prefer long/short symmetric trading systems there is no conclusive evidence that they offer any advantages, especially when dealing with markets with a structural bias. In this blog post I present two examples of the performance of trading systems that were ...
- The Contrarian Z-Score and Why You Should Always Strive to Reject Trading Systems October 20, 2014
When I first read about the z-score system some years ago I knew it was a fluke. Descriptive statistics cannot be easily converted to edges due to non-stationarity. More importantly, a quant should be always suspicious and strive to reject systems. ...
- An Example of How Conclusions from Technical Analysis Depend on Data Sources October 10, 2014
One charting service gives a value of 189.55 for the 200-DMA of SPY and another gives a value of 190.50. This difference is due to the choice of data, adjusted vs. unadjusted, and an example of how the conclusions of various analysts may depend on the price series used. Below ...
- Relative Strength Index Vs. Gambler’s Fallacy Indicator September 21, 2014
Lately some markets have remained highly oversold and others highly overbought for extended periods of time, as also measured by the Relative Strength Index, or RSI. Maybe in this new market environment, technical traders should consider using the Gambler’s Fallacy Indicator™, or the ...
- Borel’s Law and the Stock Market September 18, 2014
A popular science interpretation of Borel’s Law is that phenomena with very low probabilities do not occur. Given that the rally in stocks has lasted for more than 5 years and the Fed promise to keep interest rates low for a long ...
- The Forexization of the Stock Market August 30, 2014
Due to central bank intervention via quantitative easing and the rise of dark pools, the stock market is under “forexization”. This will be good for a few major players but, given the experience from the forex market, it is a negative ...
- A Few Practical Principles of Quantitative Trading July 27, 2014
Many traders would like to transition to quantitative trading but think it is overwhelmingly complicated.
- Dealing With the Small Samples of Technical Analysis May 30, 2014
Technical analysis introduces data-mining bias because of the reuse of data. Due to this fact, trading signals based on small samples are not just naive, they are very dangerous. The problem of small samples can be resolved only if they are increased. Anything else ...
- The Fundamental Problem of Backtesting and Why It Has Not Helped Much Technical Traders May 11, 2014
Trying to discover an edge by randomly backtesting ideas is equivalent to looking for a needle in a haystack. More than 25 years have passed since backtesting software became available to retail traders but the difficulty in finding an edge ...
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