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Charts reflect past price action that was driven by fundamentals and expectations. These two fundamental drivers of price can change anytime and as a result prices may suddenly reverse course. Those who think that charts can be bullish or bearish and base their ...

They should reconsider their unreasonable stand against active management after taking a closer look at the enclosed chart. In my opinion, 15 trades in 13.5 years are not such a big deal for the type of dramatic improvement in returns. ...

Many traders think that price action analysis is the visual examination of charts for patterns of price and indicators. But the visual examination of charts mostly projects cognitive biases on price action and facilitates selection of conditions that support subjective views about market direction. There are many objective ways ...

Developing trading systems on an in-sample of historical data and then testing the results on an out-of-sample is a widely used practice that hides some fundamental flaws. In this article I list some of the problems that may arise from the wrong application of ...

Simulations of a random system since SPY inception show that nearly 35% of random traders, human or automated, have made some profit. However, only 1% of random traders were lucky enough to exceed the buy and hold return with dividend ...

Backtesting trading systems on historical data is again becoming popular almost 30 years after it started being used by individual traders due to recent advances in web technology and server speed that allows its online implementation.

Random trading can produce high positive returns as well as very low negative returns. In a post a week ago with the title Random Trading Versus Trading Randomly I included distributions from random SPY trading and I showed how they impose limits ...

This trend-following trading system is based on an algorithm that adapts to market conditions and it is significant at the 99.86% level in the case of SPY based on the performance results obtained from 20,000 simulations of a random system. There ...

Suppose a trader has purposely used a random system to trade SPY since its inception. What was the probability to make annually more than the buy and hold return? Or suppose a trader has worked hard to develop a trading system that generated a positive ...

Selection and data-mining bias in trading system development often lead to random results.