- The Impeccable Timing of QE3 September 17, 2012
The announcement of QE3 propelled S&P 500 passed strong longer-term resistance at 1440.14. In my opinion, in the absence of the announcement and the backing of the ECB the index would have made a short-term top or even would have started on a Fibonacci ...
- Forward Performance Report of Machine Generated Trading Strategies September 4, 2012
Forward performance testing is considered the third and final stage before employing a system in actual trading. The first two stages are the in-sample and out-of-sample testing. This is a report for 6 systems that have been developed using Price Action Lab for 3 ETFS (SPY, ...
- Fooled by Multiple Comparisons When Developing Systems For Single Securities or Portfolios August 31, 2012
The idea that systems developed on historical data of a portfolio of securities have better chance of being non-random as compared to systems that are developed for a single security is based on the assumption that the size of the rule set used in the data-mining ...
- Further Analytical Evidence that VIX Just Tracks the Inverse of Price August 25, 2012
In two separate posts this week I argued that VIX has no predictive capacity and that it simply tracks the inverse of price. I also asserted that a new paradigm has emerged in the markets according to which equity investment risk ...
- A New Paradigm for Equity Investment Risk August 23, 2012
Equity investment risk is proportional to the inverse of price. This is the new paradigm for risk in the equity markets. As prices increase, risk decreases. As prices fall, risk increases. This is happening mainly because of momentum trading and ...
- On the Zero Predictive Capacity of VIX August 21, 2012
VIX is a derivative of price and no derivative of price can predict price. VIX is a non-linear function of the inverse of the price of a security. When prices rise, VIX falls and when prices fall, VIX rises, basically this ...
- Markets Reward Risk Takers August 12, 2012
The recent price action in S&P 500 index is another proof that markets reward risk taking and punish risk aversion. We all know this principle but few are able to actually use it to profit. Those who did not enter the market in early ...
- Portfolio Backtest and Cross-validation of Machine Designed Trading Strategies August 11, 2012
It is easy for trading system developers to be fooled by randomness especially when the underline process that is used for discovering the trading systems is in itself inherently random. Out-of-sample testing is not enough to guarantee statistical significance of any results obtained because ...
- Report of the Forward Performance of Machine Designed Trading Systems July 23, 2012
This is a report of the forward performance of machine designed trading strategies for SPY, QQQ and DIA using Price Action Lab. We call “forward performance” the results obtained for the systems after the end of the out-of-sample period used during the development phase. These ...
- Fooled by Randomness, Over-fitting And Selection Bias June 30, 2012
There are software programs that allow combining technical indicators with entry and exit conditions to design trading strategies that fulfill desired performance criteria and risk/reward objectives. Due to data-mining bias, it is very difficult to differentiate the random strategies from ...
