Quantitative analysis, research and trading strategies in the financial markets in all time frames
Once in a while I get an e-mail from readers asking for advice if they should go out on their own and start trading full time. But before you do that you have to ask yourself the following: 1. Are you currently consistently profitable? If not, why do you think
Continue readingI keep a detailed log on all my trading activities, both daytrading, swingtrading and long-term positions. I believe this is the only way I can improve my trading. However, doing all this “extra” work is not exactly the most interesting job on this planet, but I believe by far the
Continue reading
Articles about daytrading has about twice as many hits than other articles (on this website). What’s so appealing with daytrading? Is it that most people think it’s easy money? It’s not, rather the opposite. Is it the adrenaline rush? It shouldn’t. The more “boring and dull” you make daytrading, the
Continue reading
(Some personal and random thoughts on daytrading) I have daytraded for over twelve years and I still like what I do. Actually, I love it! Daytrading is some kind of addictive. I need my daily shot with research and trading. My day is simply not the same if I don’t
Continue readingS&P 500 has historically a strong tendency to revert to the mean. I’m looking to find a way to fade the gap. My research has indicated that fading the gap is best after a strong move to either direction. Here are the criterias for a reasonable solid fade the gap
Continue reading
I have previously written one article about the possibility of making money in daytrading: Algo trading In general term I think it’s safe to conlude the following: The majority of daytraders lose money, certainly new ones. The turnover of daytraders is very high. The longer you survive, the better odds
Continue reading
Hmm, that was a long headline, which probably won’t catch many readers. Anyway, here is the strategy based on the ticker XLP: Yesterday must have been a down day of at least 0.25%. If XLP opens down more than 0.1% today, go long and exit on the close. Fairly simple
Continue reading
Many daytraders are thrillseekers. Too bad, because I think the best stocks are those that are most boring. I haven’t really thought much about it until this fall, but after starting reading a lot of academic papers I have realized the following: I basically only daytrade stocks that have a
Continue reading
I had a look at my performance on one of the new strategies I’ve implemented over the summer and fall. Here is the previous first two posts I wrote: Part 1 Part 2 I started trading this strategy live in July with the lowest minimum size I can possibly trade.
Continue readingToday is 1st of November and the start of a new month. I’m just trying to grab some stats on how the first trading day of the month has been from January 2005 until July 2012. Average opening from yesterday’s close: +0.066% Average gain from yesterday’s close until today’s close
Continue readingYesterday was a rather frustrating trading day. I ended up net long in my new daytrading strategy in which I have recently increased size. After 1,5 hour of trading, and getting more and more fills, I had a nice gain, only to see it evaporate until a small loss at
Continue readingHere is the hypothesis: if SPY rallies from the open and until the last hour, can we make money by going long one hour before the close and exit on the close? Previously I have written about the different periods of the trading day: At what time of day does
Continue readingBeing a daytrader is a struggle, so I have lately broken down the trading day into performance during the first hour, the middle of the day and the last hour. Previously I have written two articles about when SPY establishes the high and low during the trading day: At what
Continue reading
Once in a while I receive e-mails about which firm I trade for. As I have written many times I trade both prop and retail. All my daytrades are done in a prop account (Nevis Trading), and overnight strategies are done in Interactive Brokers. Echotrade LLC From 2001 until July
Continue readingI have previously written to articles about when SPY sets high and low during the day: At what time of day sets SPY high and low? Intraday high and low in SPY by weekday I’m trying to find something tradeable out of these simple numbers but it’s not easy. However,
Continue readingIn a previous article I wrote about when SPY sets a high/low. But is there any difference separated by weekday? Here is the number from January 2010 until 1st og August 2012: #Number High Low High Low of days First hour First hour Last hour Last hour Monday 119 44
Continue reading
After ten years of daytrading, I have experienced the expensive way the importance of good data. The famous saying “garbage in, garbage out” is indeed true. I have probably lost tens of thousand dollars on trading strategies that is based on “garbage”. Sad but true. Problem is, there is not
Continue readingI decided to look more into opening gaps in SPY (S&P 500). After all, a lot of traders claim to make good money on this strategy, at least according to my search on the web. For me this is unknown territory as up until this date I have only been
Continue readingOne of my favourite “formulas” to look at in mean reverting instruments is this formula: (HIGH-CLOSE)/(HIGH-LOW) This simple formula increases the odds a lot, in my experience. Here is an example: Enter at close if the above formula is less than 0.5: The blue line is the accumulated return in
Continue readingThree german researchers have written a study called Is Poker a Game of Skill or Chance? A Quasi-Experimental Study. I was made aware of this article in Peter Warrens blog (only in Norwegian). I totally agree with the content. Most traders have too much confidence and are too full of
Continue readingThe opening gap strategy I published last week showed promising returns. However, can we trust the data? The test was performed on EOD data from Yahoo! (open, high, low and close per day). Today I have downloaded 30 mins data from IQFeed. The test period is the same: 1. January
Continue readingSearching on the internet you can find a lot of articles on how to play the opening gap of S&P 500. Today I did my personal twist on this strategy. Over the last two months I’ve been trading a similar strategy, but not exactly the same as the one I’ve
Continue reading
This morning I had a look at when SPY makes high and low during the trading day (regular market hours from 0930 to 1600). I had no particular plan behind this, I just wanted to know if I can draw some trading ideas from it. The total sample is 650
Continue readingWhen I summarized my trading from 2002 to may 2012, I looked at how much of my daytrading profits were generated from the best trading days. Before I did the analysis, I expected the “grinding” (ie. the small profits every day) to be my greatest asset in trading. It turns
Continue readingSome days ago I wrote about a new daytrading strategy I have implemented. This morning I had a second look at it and decided to test it using some of the stocks I did not pick to my portfolio list. I simply picked 31 random stocks out of the 365
Continue reading
Over the last several months I have been looking into a new potential daytrading strategy. This one looks into more illiquid stocks and therefore I won’t reveal the strategy: It’s simply not enough volume for many traders to trade the same. So why do I bother to publish it? I
Continue readingLately I have done some research trying to develop some new daytrading strategies. I have tested all these strategies with entry on the open (OPG). Exit have been after two hours or on the close (MOC). There are two huge advantages using OPG and MOC compared to exiting trying to
Continue reading
In the long run one can expect to be rewarded for taking risk. Let’s test a very simple strategy with this in mind. If SPY (which is an ETF of S&P 500) opens down, but above -0.45, then go long at the market, vice versa for short. We don’t want
Continue reading
Some weeks a go I wrote about rebate trading. To better illustrate this I will show you a copy of my P/L sheet showing it: In row 1 the gross profit is 18 USD, commission is 0.4, ECN fee (rebate) is minus 0.84 (I receive 84
Continue reading
I record every trade I make in Excel. I categorize them into short/long, which day of week, date, where the market opened, how the market performed the day before, how the stock performed the day before, average volume in the ticker, P/L in the ticker and which strategy. Of course,
Continue reading
Most traders seem to focus more on entry and money management than exit when developing strategies. It is perhaps no sense in discussing what is more important of entry or exit, but anyhow we’ll try to separate this in this short article. After all, it’s when you sell you book
Continue reading
Trading is very difficult. Not only is it difficult to find profitable strategies, you also have to overcome slippage and commission costs. Slippage is difficult to estimate. Commissions costs, however, is easy to calculate. Personally I pay .001 per share in clearing plus ECN rebates and taxes/fees. So far in
Continue reading
One word I often use in my articles is the word slippage. Simply explained this means the difference between fictional results when testing strategies, and the actual results in real life adjusting for commissions and transaction costs. Commission is a cost we know. However, costs related to buying and selling
Continue reading
These days computer and algo trading do most of the volume in the US. Stocks move very fast and at very thin volume. This creates some nasty challenges for the individual daytrader. Either you have to compete on the same terms as them (or trade with them), or you have
Continue reading
I am Norwegian, and living in an obscure former soviet country, but are mainly trading US stocks. Why? There are several resons. Here I will mention what I consider the main reasons: A big stock universe. There are a lot of liquid stocks and a lot of illiquid stocks among
Continue reading