Quantitative analysis, research and trading strategies in the financial markets in all time frames
Back in 2016 I published an article on using short term RSI (relative strength index) on SPY. Let’s test how a slightly different strategy performs on QQQ: RSI(2) must be lower than 10. IBS must be lower than 0.2 (read here for an explanation of IBS). If both 1 and
Continue readingYesterday, the 3rd of September 2020, witnessed a pretty big drop in the stock market with Nasdaq leading the decline with a drop of 5.07%. Out of interest I looked at the performance of September going back to 1970, using S&P 500 (not including dividends). The chart below shows the
Continue readingToday I came across an unpublished article I started way back in 2012. The strategy is as follows: Calculate a moving average of the last 15 days’ closing price. Calculate the average true range (ATR) of the last 15 days. Subtract 2 multiplied by 1.5 from number 1 (1.5 times
Continue readingThe models that dominate all human decision-making today are duly heavy on simplistic logic, and light on magic – a spreadsheet leaves no room for miracles. But what if this approach is wrong? What if, in our quest to recreate the certainty of the laws of physics, we are now
Continue readingIn a previous post I wrote about a trader’s mindset. You have to battle the markets, of which you have no influence and control, but more importantly you have to battle yourself (and obviously you can control that). There are so many ways to lose, but so few ways to
Continue readingThis week I came across this blogpost by Nick Maggiulli. The blogpost is based on the “All Weather Portfolio” developed by Ray Dalio and his firm Bridgewater Associates, one of the biggest hedgefunds in the world. Dalio’s firm has spent a considerable time to develop a portfolio that does well
Continue readingWe are now entering the best month over the last 20 years in long-term treasuries (TLT) – August. From the last closing price of July until the last in August the average has been a pretty solid 3.23%. This is substantially more than any other month. Four months/years have shown
Continue readingI currently reread Victor Niederhoffer’s The Eduction of A Speculator. I regard this book as one of the best I have ever read. It’s not an easy read, but it completely changed my mindset for the better 20 years ago. What makes this a good book? Because it explains the
Continue readingBackground: An EU/EEA regulation called MiFID requires brokers to categorize its clients as either “retail” or “professional” in order to determine the correct level of investor protection and transparency. MiFID has thus prohibited EU-residents from investing and trading in US ETFs, like for example SPY, XLP, EEM etc. The legislation
Continue readingOver the last weeks I have written three articles about monthly momentum in TLT, SPY and EEM: Monthly momentum in SPY, TLT and EEM. Monthly momentum in SPY and TLT. Monthly momentum in SPY and EEM. The first two strategies seem to perform reasonably well. Many investors seek to minimize
Continue readingI have over the last week written two articles about momentum: Monthly momentum in SPY, TLT and EEM. Monthly momentum in SPY and TLT. The third looks at rotating between the two most popular stock ETFs: SPY and EEM. The assumptions are like this: It’s based on monthly data in
Continue reading20+ treasury bonds show a significant different performance depending on the day of week. Assume we start with an account worth 100 000 and hold for one day: Mondays (from close Friday to close Monday): 58 072 Tuesdays: 19 077 Wednesdays: -16 986 Thursdays: 944 Fridays: 137 862 Clearly, Fridays
Continue readingSome days ago I published an article which rotates between SPY, TLT and EEM based on monthly momentum. Let’s test how this strategy performs when rotating between SPY and TLT: It’s based on monthly quotes in the ETFs SPY and TLT. Every month rank both based on last month’s performance.
Continue readingMany traders swear to stop-losses by default, but to me it doesn’t make sense because: If you buy something at 100, why should you just put in an arbitrary stop-loss level? If you bought something at 100, presumably it’s because of value or some quantified reasoning. If you use stop-loss
Continue readingBelow is a very simple and easy strategy to implement: It’s based on monthly quotes in the ETFs SPY, EEM and TLT. Every month rank them based on last month’s performance and go long the best performing. Hold for one month and repeat (or continue being long the same instrument).
Continue readingNo matter how good strategies you have, they are most likely worthless if you can’t execute them properly. What looks like a piece of cake in a backtest, is completely different in the real world when you are risking your own hard earned money. Will the strategy continue to perform
Continue readingBelow is a simple and easy trading strategy to implement in SPY or S&P 500: IBS (internal bar strength) must be lower than 0.25 (using daily bars). RSI (21) must be below 45. If 1 and 2 are fulfilled, go long at close. Exit when close is higher than yesterday’s
Continue readingBelow is a simple and easy trading strategy to implement in QQQ: IBS (internal bar strength) must be lower than 0.25. RSI (5) must be below 25. If 1 and 2 are fulfilled, go long at close. Exit when close is higher than yesterday’s high (you can use higher than
Continue readingIn 2018 I wrote about a potential Monday/Tuesday trade strategy in Nasdaq. How has this strategy performed during the Covid-19 mess? Pretty good, actually. I’ve been trading this strategy, with these parameters: Today is either Monday or Tuesday. Internal Bar Strength (IBS) is 0.15 or below (Google IBS if you
Continue readingSome months ago I put up another website where I write about long-term investing. The website is www.rationalthinking.net.
Continue readingMost traders and investors have heard that you need to sell in May and go away. Is this just a myth or is it correct? Three years a go I wrote an article about this, but this article covers a longer time span. Let’s find out by looking at the
Continue readingI’ve been quiet for some time, both for day- and swingtrading. The reason is quite simple: In January 2018 I decided to take a one year sabbatical from daytrading. Two years later and I’ve still not made any efforts to get back into the game. And, quite frankly, I doubt
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I guess most readers of my website have read books by management gurus like Jim Collins and Tom Peters, and many more have probably studied Micheal Porter’s Competitive Strategy. But “the problem” with business theory is that it’s solely built on case studies and have not been tested in a
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I believe the annual letters of Buffett is an invaluable source of investment knowledge. I recently reread all of them, in addition to rereading Lawrence Cunningham’s The Essays Of Warren Buffett – Lessons For Investors And Managers. The book is excerpts from all the annual letters and is basically all
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I like to take notes when I read (see my notes on the pic to the left, excuse my eight-year old handwriting). I believe notes are a wonderful resource to revert to later, an even better is having the quotes easy accessible online for later use. Thinking In Bets by
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Some weeks ago I published an article about what investors and traders can learn from Atul Gawande’s The Checklist Manifesto. I like to take notes when I read (see my notes on the pic to the left, excuse my eight-year old handwriting). I believe this is a fantastic resource to
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I reread all of Nassim Nicholas Taleb’s books in October (except The Bed of Procrustes, which I have not ordered yet). I strongly recommend all his books, both for insights in your “everyday” life or “trading/investment” life. While reading I wrote down what I consider the best quotes from his
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Charlie Munger likes to think inversely. Inverse thinking simply means focusing on the things you don’t want to happen. Munger didn’t invent this concept, but he has made it immensely popular. While Munger turns the question on its head, he touches upon a very important aspect: how to avoid mistakes.
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This weekend I reread The Checklist Manifesto, a book published in 2010. This is an outstanding book and I highly recommend it. Below you find some random arguments why I believe a checklist should be a part of the toolkit of any aspiring speculator or investor. Both Charlie Munger and
Continue readingRob Hanna at Quantifiable Edges had an interesting article some days ago about bounces in S&P 500. I made some changes to his strategy an ended up with these simple rules: Yesterday IBS (Internal Bar Strength) was at least 0.6 or higher. Yesterday’s low was lower than the lowest low
Continue readingAugust has historically provided good returns for owners of 30-year US treasuries. I read about this seasonality many years back, but I’m quite surprised it still seems to be working pretty good. Below is an equity chart showing the return buying 200 shares in TLT at the close in July
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Below is a potential short strategy in S&P 500: Short= C>Ref(C,-1) AND Ref(C,-1)>Ref(C,-2) AND Ref(C,-2)>Ref(C,-3) AND ADX(5)>35 AND RSI(2)>90 Description: If the close if higher for the third time in a row, 5 day ADX is bigger than 35 and RSI(2) is bigger than 90, then go short on the
Continue readingI often receive e-mails from potential traders that want to get “rich” trading. I tell them to instead consider investing their capital for long-term appreciation, preferably via passive or active mutual funds. This is why: Most short-term traders end up losing money, not making money. If you invest in a
Continue readingCrowdfunding/P2P is a relatively new asset class and has increased in popularity over the last five years. To my knowledge the biggest market, UK, at one point had 15% of the lending market served by crowdfunding. But before you dip your toe in the crowdfunding water you should carefully evaluate
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By looking at some potential strategies for S&P 500 I found some very interesting facts that I wouldn’t guess beforehand. I used the ETF SPY as a proxy for S&P 500. My dataset starts at 1. January 1994 and ends yesterday, 25th of October 2018. The data is adjusted for
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