For decades, traders have used momentum strategies, the idea that past winners keep winning, to find success in equity, currency, and commodity markets. While most research focuses on long-term trends over months or years, a groundbreaking study by Wen et…
In the ever-changing landscape of financial markets, traders sometimes refabricate old indicators to improve their market analysis and spot trend changes in time — one such indicator is the Composite Index Divergence Indicator (CIDI). What do you know about the…
In a recent research paper titled “Returns to Constant Leverage Strategies: General Principles and Application to Levered Single-Stock ETFs,” Professor Hendrik Bessembinder of Arizona State University provides a deep dive into the mechanics and risks of the rapidly growing levered…
https://www.youtube.com/watch?v=NdnJX4kjPQM Imagine a trading strategy so simple it takes just five minutes a year to manage, yet it has outperformed the Nasdaq for over a decade. That’s exactly what @thechartist showed on X. This strategy, pairing two ETFs with a…
A recent quantitative study examined the feasibility of generating abnormal returns (alpha) in the highly specialized commodity futures market by utilizing common technical indicators: the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI). This research investigated whether…
Williams %R was developed by the famous trader and tax rebellion Larry Williams, who has given names to several technical indicators. Last week we wrote about the WilliamsVixFix indicator, and today we are explaining the Williams %R trading strategy and…
Christmas Day is one of the federal holidays in the US. But how does it affect the US financial markets? Is there a Santa Claus rally in stocks? Can we develop trading strategies for this holiday season? Our trading strategy…
Christmas Day is one of the federal holidays in the US. It’s a well-known “fact” that there is normally a Santa Claus rally in stocks, but do we see the same tendencies in the gold price? Is there a Christmas/Santa…
(Source) Trading simulations offer a clean way to see probability at work when outcomes feel uncertain. Markets and casino games look different, yet both run on the same arithmetic. A 2023 review from Insider Monkey pointed to probability and statistics…
This article challenges the conventional wisdom that long-term investing in triple leveraged ETFs (TLETFs) is an “anathema” due to issues like daily rebalancing and “beta slippage” or the “constant leverage trap,” which often lead to poor long-term performance. We show…
It is important to be able to identify the beginning of a new trend; equally, it is also important to be able to identify the end of a trend. A well-timed entry fits perfectly with a well-timed exit. The parabolic…
For many, the approach is to buy low and sell high. But that is not the case with the 52-week high trading strategy – you do the opposite. What is the 52-week high trading strategy? The 52-week high strategy is…
Understanding volume and price, and how they can influence the market, is very important in trading. Since volume is the measure of activities in the market, traders can use the information provided to increase the probability of their trades. A…
Volume is one of the most overlooked aspects of technical analysis. Most traders rely heavily on price indicators, even though volume can reveal hidden momentum and confirm (or contradict) price action. One way to quantify volume strength is to use…
How a psychological bias – the repurchase effect – predicts lower future stock returns. We show you a investor regret trading strategy. Have you ever sold a stock too early and watched it soar—and felt that pang of regret? What…
What Is the Laguerre RSI? This article is a practical short guide for traders. The Laguerre RSI is a lesser-known but highly effective momentum indicator developed by John Ehlers. It aims to improve on the traditional Relative Strength Index (RSI)…
Forget gold and options: This Factor-Based Strategy Is the Ultimate Crisis-Proof Investment (plus trend/following). A common investment strategy involves balancing risk and return with a traditional portfolio split: 60% stocks (equities) and 40% bonds (the 60/40 portfolio). While this portfolio…
In this article, we backtest Larry Connors‘ 3 day high/low Method/Strategy. How has the strategy performed since it was revealed in his book in 2009? The 3 day high/low method/strategy performed well in Connors’ book, and it still works pretty…
In finance, markets are generally believed to be efficient, meaning predictable patterns should quickly vanish through arbitrage. However, groundbreaking research by Heston et al. (2010, 2011) uncovered a peculiar regularity: the intra-day stock return periodicity puzzle. This puzzle describes a…
This blog post explores fascinating new evidence from a research paper titled “From Red to Blue: The Long-Run Inversion of Political Cycles and Stock Market Returns Over 153 Years” by Han, Lu, Xu, and Zhou. The paper documents a fundamental…
Can we develop a Thanksgiving holiday seasonal trading strategy? Is Thanksgiving bullish or bearish for stocks? Thanksgiving Day is one of the federal holidays in the US. The day after Thanksgiving is called Black Friday and is a day when consumers…
Among the tools available for analyzing the markets, oscillators are some of the most interesting for tracking the momentum of individual price swings — one that seems to do a damn good job is the Pretty Good Oscillator (PGO). What…
The triangle pattern is one of the common chart patterns you will encounter when analyzing stocks for short-term trading, and the most reasonable way to trade the pattern is the breakout strategy. What is the breakout triangle strategy? The triangle…
Hindenburg Omen Indicator Trading Strategy: how do you use it and what is it? Stock market crashes can wipe out traders’ and investors’ profits or even put them at a huge loss in no time. If you have been in…
Chart patterns can help you understand the condition of the market. The double top pattern can warn you about a market peak, but do you know what it is and how to identify it? The double top chart pattern trading…
Learning how to accurately identify and analyze the double bottom chart pattern trading strategy can help you read market conditions and determine when to look for buying opportunities. But what is this double bottom chart pattern? The double bottom chart…
Just as traders use technical indicators to attempt to predict the future direction of an asset, quantitative analysts also utilize various statistical and mathematical models to forecast the future values of assets, with one of these models being the Kalman…
There are countless technical indicators that traders look at. Among the most popular that try to gauge momentum are the RSI and the stochastic indicator. However, today, we will learn about one that is not so well-known: Chande momentum oscillator…
If you’ve dipped your toes into cryptocurrency, you know how wild the market can be. Unlike traditional assets like stocks, which are tied to company fundamentals, crypto prices are driven almost entirely by simple supply and demand. This reliance means…
Gaps are a common feature in financial markets, and traders often wonder what happens after a gap down at the open. Does the stock market usually keep falling, or does it bounce back during the day? There is a 47%…
For most retail traders, trading is mostly about technical analysis using trading indicators applied to a price to look at the current forces in the market. While technical indicators may play a significant role in trading, professional day traders don’t…
The magic behind Jim Simons’ trading strategies consists of collecting an enormous amount of data and analyzing the data to find statistical patterns and non-random events in a wide range of markets. Furthermore, Jim Simons and Renaissance Technologies have put…
Connors RSI trading strategy often referred to as CRSI, is a momentum-based oscillator and indicator that tries to improve on the original 14-period RSI indicator developed by Welles Wilder. Unlike the original 14-period RSI indicator, the CRSI uses 2 periods…
The Copper/Gold ratio trading strategy seems to offer good entry points for both copper and gold. We backtest the ratio and find positive results for the next one to 12 months after a signal is triggered. Copper and gold are…
Profit Factor is a key performance metric used in trading to assess the profitability of a trading system or strategy. It’s calculated by dividing the total profit generated by winning trades by the total loss incurred from losing trades. Essentially,…
Today we test Larry Connors‘ R3 strategy and we continue backtesting the trading strategies Larry Connors and his team published in 2009 in a book called High Probability ETF Trading. All the strategies were tested on a basket of 20…
In this post, we’ll walk you through three long-term trading strategies that aim to reduce drawdowns, ride bull markets, and potentially outperform buy-and-hold with less stress. These are the 3 long-term strategies that work: 1. The 200-Day Moving Average Strategy…
There are different types of tools and indicators professional traders can use to track markets and price action, but oscillators seem to suit swing traders more, which is why the Gator Oscillator was created from the already existing Alligator indicator….
In the world of finance, professional financial analysts play an important role, directing the allocation of capital through in-depth research. When analyzing a company, analysts typically conclude their reports with a recommendation, usually categorized as strong buy, buy, hold, sell,…
The phenomenon known as the overnight effect or overnight drift is a significant topic in quantitative finance, referring to the tendency of asset returns during non-trading hours to exhibit substantial patterns. This drift has been well-documented across numerous asset classes,…
What is the MAR Ratio and Why Should You Care? The MAR Ratio (Managed Accounts Report Ratio) is arguably one of the most important yet underutilized performance metrics in trading and investing. Named after the Managed Accounts Report newsletter, where…
Why day traders fail boils down to at least 16 reasons. This article explains why day traders fail and what you can do to survive and perhaps even prosper. Why day traders fail is mainly because they don’t understand the…
The lunchtime effect in the stock market, particularly in the U.S., refers to a noticeable pattern where trading volumes and returns drop during lunch hours, typically between 11:30 AM and 1:00 PM. This phenomenon has been observed across various markets…
The relationship between gold mining shares and gold bullion is often misunderstood. While gold miners move with gold prices because their revenue depends on the price of gold, they exhibit a clear long-term underperformance compared to the physical metal. We…
A recent academic paper titled “An Information Factor: What Are Skilled Investors Buying and Selling?” introduces a fascinating, evidence-backed trading strategy that builds on a deceptively simple premise: Follow the money — but not just any money. Follow the informed…
The increasing accessibility of computational power and public data has recently spurred greater investor reliance on technical analysis techniques. This environment makes it feasible to evaluate and back-test various trading methodologies thoroughly. Technical analysis aims to derive an optimized approach…
In the long term, gold has proved itself as an inflation hedge, but not in the short term. Gold is often viewed as the world’s oldest financial asset, possessing a reputation as a crucial safe-haven asset, particularly during times of…
Why Bitcoin is Called ‘Digital Gold’ Bitcoin is a relatively new asset, having debuted with the white paper by Satoshi Nakamoto in 2008. While gold has existed throughout human history, Bitcoin has quickly grown, achieving a market value of over…
The options market has traditionally been considered the domain of sophisticated institutional investors, but recent years have seen a dramatic shift. Facilitated by the advent of zero-commission trading on apps like Robinhood, retail investor activity in U.S. options has soared,…
The $3.5 billion “secret”: how a bias skews S&P 500 option payoffs every month! In this blog post, we tell you how retail and prop traders make money on the options expiration day (OPEX). For investors and traders in the S&P…
In an age dominated by machine learning, high-frequency trading (HFT), AI, and complex black box models, it’s easy to believe that only the most sophisticated strategies have any edge left. But it’s not! If simple can succeed, why complicate things?…
When traders think about diversification, they often focus on spreading risk across different stocks, sectors, or asset classes. But few consider the powerful benefits of adding gold strategies to their trading portfolio. Gold has historically behaved differently from equities, bonds,…
The systematic global macro investment style, labeled Macro Momentum, is grounded in economic theory and aims to capitalize on the tendency of market participants to underreact to news by positioning on the basis of fundamental macroeconomic trends. In general, such…
While retail participation in financial markets has surged since the mid-2000s, especially following the 2020 pandemic and events like the 2021 GameStop short squeeze, retail traders often face the daunting challenge of competing with high-frequency trading (HFT) algorithms. Finding proven…
The Recession Fear Index (RFI) is proposed as a direct measure of recession concerns based on Google search activity. The development of the RFI is premised on the shift toward active information-seeking by market participants. The search frequency data derived…
Traditional equity and commodity markets frequently exhibit a well-documented pre-holiday effect, where returns on trading days immediately preceding public holidays tend to outperform other days. This anomaly is classified as one of the most substantial calendar effects in the stock…
The worst week of the year for stocks is the last week of September, after the third Friday of the month. September is a poor month for stocks, especially the week after OPEX day, which is the third Friday of…
While some prominent investors, like Warren Buffett, advocate for highly concentrated portfolios, believing diversification is unnecessary for those who “know what they are doing”, academic research and empirical evidence suggest the opposite. Nobel Prizes in financial economics have been awarded…
In recent years, the cryptocurrency market has rapidly transformed from a niche innovation into a significant segment of the global financial system. By March 2025, its total market capitalization soared past $3 trillion, with over 100 cryptocurrencies individually exceeding $1…
This post looks into a recent study titled “Does Trend Following Still Work on Stocks?” by Zarattini, Pagani, and Wilcox, which extends the foundational 2005 work by Wilcox and Crittenden. We emphasize that we at QuantifiedStrategies.com have NOT backtested or…
Have you ever wondered if it’s possible to profit from stocks that experience significant one-day drops? New research sheds light on economically significant short-term price reversals, offering insights for traders looking to refine their strategies and potentially achieve substantial returns:…
Is gold truly the inflation-proof sanctuary many believe it to be? While its allure as a safeguard against rising prices has long been celebrated, particularly after the turbulent 1970s, recent comprehensive analysis reveals a far more nuanced reality. Far from…
Do you sometimes wonder what separates successful traders from the 90% who fail? The answer isn’t better market predictions or secret indicators – it’s understanding the mathematics behind trading success. Most retail traders approach markets trying to predict where prices…
A study called Market Intraday Momentum by Lei Gao, Yufeng Han, Sophia Li, and Guofo Zhou reveals a significant and consistent pattern in market behavior: intraday momentum. This phenomenon shows that the market’s performance in the first half-hour of trading…
Most traders fear falling prices. But a downtrend can also be a blessing in disguise, especially with crypto. Volatility cuts both ways. Knowing how to act when markets decline lets you protect your capital and seize profit opportunities, even amid…
An index rebalance trading strategy is a trading strategy that seeks to exploit the price movements of stocks that are being added to or removed from a major market index. Index funds, which are passively managed funds that track a…
The stock market seems to move in a highly chaotic way, but on closer observation, you will notice that the movements follow a certain repeating pattern over the long term, as suggested by the Dow Theory. What do you know…
Since 1993, all the gains in the S&P 500 have come from owning the index from the close to the open the next day. We see the same tendency in the gold markets. Thus, we can develop night trading strategies…
The Center of Gravity (COG) oscillator stands out in the crowded field of technical indicators as a rare predictive tool that aims to anticipate price movements rather than simply react to them. Unlike most lagging indicators that confirm trends after…
While traditional equity markets have shown diminishing overnight return anomalies since 2008, cryptocurrency markets tell a dramatically different story. Recent analysis reveals that virtually all Bitcoin (BTC) and Ethereum (ETH) returns occur during overnight hours when US equity markets are…
Correlation in trading strategies , which measures the relationship between two datasets, is an essential variable for a trader. How your positions move in relation to other positions is crucial to understanding and managing risk. Correlation in trading means how…
Investing and trading for the long term, even in the most promising assets, invariably involves enduring periods of significant price declines, known as drawdowns. A drawdown is defined as the price decrease from a peak to a trough. As Charlie…
Hendrik Bessembinder, an academic, published a study in 2017 that went on to become widely spread and known. His hypothesis was pretty straightforward: do stocks outperform Treasury Bills? No, most stocks fail to beat one-month Treasury Bills during their lifetime…
Can a single trading rule really beat the market? It sounds too simple to be true, but our backtests suggest otherwise. In this article, we explore whether one straightforward rule can outperform buy-and-hold investing, both in stocks and in crypto….
Can a large language model like ChatGPT predict stock price movements by analyzing news headlines? That’s the question tackled by researchers Alejandro Lopez-Lira and Yuehua Tang in their recent paper, “Can ChatGPT Forecast Stock Price Movements?” The results are surprising…
The traditional 60/40 portfolio, 60% stocks and 40% bonds, has been the cornerstone of investment advice for decades. But what if we flipped conventional wisdom on its head? Thomas Carlson’s “Defense First” strategy, as analyzed by Allocate Smartly, presents a…
Do you sometimes wonder what are the historical returns for stocks, bonds, gold, real estate, and cash? Which asset class has performed the best over the last century? We are wondering, and we thus decided to compile all the data…
Investors love certainty, but markets rarely offer it. Still, some frameworks help us think more clearly about what drives returns—especially over the long term. One of the most intuitive was developed by none other than John Bogle, the founder of…
Momentum trading strategies are the practice of buying and selling assets according to the recent strength of price trends. Traders who use the strategy aim to buy securities that have been showing an upward price trend and short-sell securities that…
Bitcoin is a volatile beast. It doesn’t behave like stocks, bonds, or even gold. It trends when it wants to — and when it does, it often does so aggressively. That’s exactly why trend-following strategies can work well with crypto….
Today we are presenting three free mean reversion strategies. They were partially published on this website a few years back, and today we make some minor adjustments and present their performance on different ETFs. Furthermore, we discuss why mean reversion…
In May 2015, Micheal A. Gayed published a paper called Lumber: Worth Its Weight in Gold Offense and Defense in Active Portfolio Management (free download at SSRN). We used that paper to make a profitable lumber/gold ratio trading strategy for…
Jack Bogle’s famous advice was to avoid searching for individual stocks, sectors, or markets that may perform better and simply invest in the entire market. This means using index funds to build a diversified portfolio. The Bogleheads 3 Fund Portfolio…
Sometimes, trading smart means using a tool that shows you where the power dynamics in the market lie so you can play along with the big boys, and that’s where the Balance of Power indicator comes in. What do you…
Who is the best investor: Jim Simons or Warren Buffett? Jim Simons died in 2024, and Buffett retires at the end of 2025, aged 95. Thus, it might be relevant to ask: Jim Simons vs. Warren Buffett: Who is the…
For years, anyone in finance worth their salt could tell you a fundamental truth about stock market patterns: at very short horizons, like one month, stock returns tend to reverse. That meant last month’s losers often became this month’s winners,…
Why do intraday losers pop in the final 30 minutes of the trading session? This article shows you the abnormal returns obtained from buying intraday losers and what might be the reason for this anomaly. Key Takeaways What Is the…
You might wonder which time frame to watch when day trading. Instinctively, you might believe you need intraday bars, i.e., 5-minute bars, 60-minute bars, etc. However, after reading this article, we hope you are reconsidering. Can you day trade with…
The 4th of July (Independence Day) is one of the federal holidays in the US. How does it affect the US financial markets? The US financial markets do not open on the 4th of July, being a federal holiday to…
Overnight gaps are a common occurrence in financial markets, driven by news and sentiment shifts outside regular trading hours. But how often do these gaps reverse during the same trading day? What is a gap? In this article, we define…
Save or invest | Free Photo A win in the stock market can feel like a reward for effort and patience. When gains land in your account, the next move matters because small decisions can change long-term results. You can…
For swing traders, oscillators are not just valuable tools for market analysis but also a way to track the individual price swings they intend to trade, and which oscillator does it better than one that combines stochastic with RSI —…
Many trading indicators are available to traders. One of the indicators used in the stock market is the DeMarker indicator, named after Thomas DeMark, a prominent technical analyst. This indicator is a part of a trading system that incorporates bollinger…
Investing in individual stocks can be exciting and risky. One of the biggest concerns for investors is the possibility that a single stock could significantly drag down their entire portfolio. But how likely is that to happen? And what can…
Artificial intelligence continues to disrupt traditional investing, and one of the more intriguing applications is using large language models (LLMs) to analyze market sentiment. A recent study titled “Does Sentiment Help in Asset Pricing?” explores exactly that. Can we make…
Your strategy looks strong, the metrics are impressive, and the equity is sloping nicely upward. What is not to like? But think twice – here’s the uncomfortable truth: your backtest might still be worthless. Luck and randomness might fool you…
How likely is it that retail investors underperform the market? Sadly, the answer is very likely, almost a certainty. Emotional trading, lack of diversification, poor stock picking, and taxes all work against the average investor. But there’s good news: with…
Imagine investing your hard-earned money in the stock market, waiting a full decade, and seeing little to no growth, or even a loss. That’s the dreaded “lost decade” for the S&P 500, a period where the market barely budges, leaving…
Very few bullish candlestick patterns work, but this article presents 3 bullish candlestick patterns that work. Even though Candlesticks are a popular charting method, very few patterns have any predictive value. We use candlesticks extensively ourselves for charting because we…
Tired of market surprises? Learn what asset allocation is, why it matters, and how it helps reduce risk! How Asset Allocation Helps Reduce Risk Let’s face it, investing can feel a lot like gambling. You’re putting your money on the…
