Dow Theory Explained
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…
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…
At Quantified Strategies, we focus on strategies that are simple, practical, and backed by data. 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…
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…
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…
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…
The MACD-histogram trading strategy is a mean-reversion system that identifies momentum changes and reversal points in the stock market. The strategy has generated 6669 trades on a portfolio of 77 ETFs, with long positions better than short positions. Let’s jump…
What happens after the stock market drops sharply? Do stocks usually bounce back—or keep falling? This article explores how often the S&P 500 recovers after a big one-day drop of 2% or more. We examine the win rate and average…
Dividend stocks have long been a favored choice for investors seeking steady income and potential stability, particularly within the S&P 500, a benchmark index of 500 leading U.S. companies. With approximately 80% of S&P 500 companies paying dividends as of…
A carry trade strategy involves borrowing at a low-interest rate currency and converting the borrowed amount into another currency with a higher interest rate to invest in an asset that provides a higher rate of return. If you are active…
The S&P 500 tracks 500 leading U.S. companies, making it a reliable gauge of market health. Whether you’re a day trader, long-term investor, or just curious about market behavior, understanding the likelihood of a positive day can shape your strategy….
In the ever-changing world of financial markets, traders and investors are always seeking better indicators to improve their analysis of the markets and make better trading decisions — one interesting indicator is the Jurik Moving Average (JMA). What do you…
Opening range breakout trading strategies (ORB) are popular strategies, perhaps because of Tony Crabel’s classical trading book published in 1990: Day trading With Short Term Price Patterns And Opening Range Breakout. 31 years after it was published, we still see…
High Probability ETF Trading, published in 2009 and written by Larry Connors and Cesar Alvarez, contains some interesting strategies. They are all mean-reverting and tested on the most popular ETFs at the time of writing, which was the end of…
Want to outsmart the stock market? An insider portfolio, built on the trades of company executives and directors, might give you an edge. Can an insider portfolio beat the market? Research says it’s possible, with potential returns of 11% to…
Are you wondering if there’s a perfect day to buy stocks and boost your investment returns? Many investors have asked, “What is the best day of the week to buy stocks?” While historical patterns and market theories suggest some days…
Many traders turn to technical indicators like the Relative Strength Index (RSI) in the hope of finding consistent and objective ways to enter and exit the market. One of the more common approaches is the so-called 70-30 RSI strategy, where…
The S&P 500, a benchmark index tracking about 500 large U.S. companies, serves as a proxy for the broader stock market’s performance. Yet, data from 1928 to today shows it underperforms cash—represented by 3-month Treasury bills—roughly 19.59% of the time…
The term “10x stock” is often thrown around in investing circles. It refers to a stock that multiplies your initial investment by ten over a set period, usually 10 years. But how common are these elusive investments? Is there a…
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…
Can boring stocks really outperform? Low-volatility investing is often seen as a “safe but slow” strategy. It focuses on stable, less risky stocks that don’t swing wildly in price. But what if these “boring” stocks could beat the market, especially…
As U.S. presidential elections approach, investors often wonder how the stock market, particularly the S&P 500, will perform. Election years bring political uncertainty, campaign promises, and economic shifts, all of which can influence market trends. So, what are the odds…
Volatility indicators are critical tools in financial markets, designed to measure the degree of variation in a security’s price over time. They are particularly valuable for traders and investors seeking to predict future price movements, assess market risk, and refine…
Can we make a profitable MACD trading strategy with the help of the MACD indicator and the MACD histogram? This article examines the MACD indicator and its use to create a MACD trading strategy. It explains what the indicator is…
Moving average (MA) trading strategies, such as crossover systems, are widely used to identify trends but frequently generate false signals—misleading indications of price movements that fail to materialize. These “whipsaws” can lead to losses, especially in volatile or sideways markets….
Investors have long studied the post-earnings announcement drift (PEAD) in the stock market, but new research reveals this phenomenon is also alive and well in the corporate bond market—and perhaps even more persistent. We show you a potential corporate bonds…
Making wise investment decisions in today’s erratic financial market may depend on your ability to recognize the signals of a potential market reversal. The phrase “Reversal Day” refers to a day when a stock or market index changes direction, either…
Gaps are some of the most visible and psychologically powerful events on a price chart. When a market opens above the previous day’s high, it feels like something big is about to happen—like a trend is beginning. How often do…
Connors RSI including backtest Often referred to as CRSI, the Connors RSI indicator is a momentum-based oscillator 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…
Have you ever wondered what happens after a market explodes in volatility? In this article, we back‑test a simple rule based on the Average True Range (ATR) and ask: Does an ATR surge predict trend continuation or a snap‑back reversal?…
Key takeaways Stochastic trading strategy (Backtest) In this section, we tested the stochastics indicator strategy using two trading styles: short-term mean reversion (overbought/oversold) and %K and %D crossovers. We tried only the S&P 500, and we used the ETF with…
The Death Cross in trading is a widely cited phenomenon in the financial media. As of writing, the media is full of stories about the price of Bitcoin being close to the Death Cross. In this article, we look at…
Golden Cross Trading Strategy is famous and a cited phenomenon in the media. In this article, we look at the performance of the Golden Cross in the S&P 500. A Golden Cross involves two moving averages – one short and…
Candlesticks are popular. They are very useful for visual displays, but our previous backtests indicate candlesticks might be useful to make trading strategies as well. In this article, we look at what is the best time frame for candlesticks: The…
The Relative Strength Index (RSI) is one of the most Googled indicators in trading. “RSI 70” is often treated as a sell signal—yet crypto traders loves to fade that narrative. We quantified who is right by running two rapid-fire backtests…
WilliamsVixFix indicator was invented back in 2007 when the well-known trader and “indicator innovator” Larry Williams wrote an article in Active Trader about VIX and how you can create your synthetic VIX for any security you like. The aim of…
Moving averages are among the most popular tools in technical analysis. Simple, elegant, and widely used, they help smooth out price data and highlight trends. But do moving average crossovers—particularly the well-known 50-day and 200-day combination—actually predict future price direction?…
Market timing is often described as a futile exercise. Yet, seasoned investors know that certain seasonal patterns can influence returns. This article concludes that October is the best month to buy stocks. One of the most persistent patterns in the…
Gap trading strategies have been a popular tool for many decades. Gaps vary in size, variations, and volume depending on the asset you are looking at. Gaps can be traded in any instrument, and certain asset classes have substantial daily…
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…
This note provides an analysis of the probability of losing money in the stock market over a long-term horizon, specifically focusing on 10-year rolling returns for the S&P 500. The analysis is grounded in historical data and aims to address…
A gap up—when the market opens higher than the previous day’s close—often sparks optimism among traders. But how often does that early surge lead to a green close, where the market ends above yesterday’s close? We ran the numbers to…
A gap down—when the market opens lower than the previous day’s close—can set a grim tone for traders. But how often does that early stumble lead to a red close, where the market ends below yesterday’s close? We crunched the…
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%…
In the fast-paced world of trading, a gap up—when a market opens higher than the previous day’s close—can spark excitement and speculation. But what are the odds that the market will sustain that momentum and close above its opening price?…
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…
The best indicator for swing trading is Williams’s %R. It is one of the least known or used indicators but definitely one of the best swing trading. We tesed six indicators and based our conclusions not necessarily on the highest…
The right trading tool enables you to enter the market cautiously but exit when there are signs of reversal, just as the professionals do it — one indicator that may help with that is the REX Oscillator. What do you know…
Timing the stock market is a dream for many investors, but is it possible? By analyzing historical data, we looked at quarterly performance patterns in the SPY (SPDR S&P 500 ETF Trust) that suggest some quarters may offer better opportunities…
The stock market is officially open for 6.5 hours daily and has an opening and closing price for each stock. What is the opening price of a stock? The opening price of a stock (or any asset on an exchange)…
The S&P 500 is a cornerstone of the U.S. stock market, tracking 500 of the nation’s largest companies. For investors, it’s a key indicator of economic health—but it’s not without its wild swings. A common question arises: how often does…
The Weekend Trend Trader trading strategy is a mechanical and systematic trading system designed for part-time traders, allowing them to make decisions and manage trades during the weekend when markets are closed. In this article, we explain the Weekend Trend…
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 once-a-year…
Midterm elections, occurring every four years halfway through a U.S. president’s term, are events that can reshape Congress and influence legislative agendas. Given their potential impact on economic policy, it’s natural for investors to wonder how these elections affect the…
What if a straightforward strategy could deliver solid returns with less risk? We backtested a simple trading approach using the SPY ETF, which tracks the S&P 500, and the results are compelling. By buying only after a down week and…
The S&P 500, or Standard & Poor’s 500, is a market-capitalization-weighted index comprising 500 leading publicly traded companies in the United States. Launched in 1957, it covers approximately 80% of the total market capitalization of U.S. equities and is widely…
In today’s data-driven world, investors are turning to unconventional tools like Google Trends to gain an edge in the stock market. Google Trends tracks the popularity of search terms over time, offering a window into public interest and investor sentiment….
The Relative Strength Index (RSI) is a staple in technical analysis, often used to spot oversold conditions. When RSI dips to 30 or below, many traders see it as a potential buy signal, expecting a price reversal. But is this…
In trading, it is often said that the trend is your friend, but to follow the trend, you need to have a tool to separate the trend from market noise — this is where the Efficiency Ratio comes in. What…
As traders, we rely on many different technical tools for analysis to gain meaningful insights into market trends, and one tool that tracks the trend effectively is the Standard Error Bands. What do you know about this indicator? The Standard…
The question of whether a monkey picking stocks could outperform a hedge fund manager is a fascinating thought experiment often used to highlight the challenges of beating the market. It seems likely that, on average, random stock selection could indeed…
Investing is as much about psychology as it is about numbers. Fear and greed, two fundamental human emotions, significantly influence market dynamics. Fear can lead to panic selling during market downturns, causing sharp declines, while greed can drive speculative bubbles,…
When the stock market crashes, it feels like the world is ending. Your portfolio’s in tatters, the news is a wall of gloom, and all you can think is: How long will it take to get back to normal? How…
Imagine this: the RSI just hit 70. The charts are screaming ‘overbought,’ and everyone’s asking the same question: What happens next? Is it time to sell, hold, or double down? We have crunched the numbers and backtested the data on…
This article note provides a comprehensive examination of whether a coin toss can beat Wall Street’s top investors, drawing on a range of studies, experiments, and financial theories. Background and Context The question of whether random strategies, such as a…
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…
Mondays often feel like a drag. After a relaxing weekend, traders might dread the market open, blaming bad trades on the “Monday blues.” But is this just a feeling, or do the markets actually underperform on Mondays? To find out,…
Could the S&P 500 be in a bear market without you noticing? It’s a question that might make any investor pause. In this article, we’ll explore the probability of a stealth bear market using the 200-day moving average as our…
When the stock market closes on Friday, many traders and investors assume their portfolios are on hold until Monday. But are weekends secretly impacting your returns? New data reveals how the S&P 500, long-term Treasury bonds, and Bitcoin perform over…
Earnings seasons, the quarterly periods when companies release financial results, are known for sparking market volatility. Occurring in January, April, July, and October, these seasons are closely watched by investors aiming to capitalize on price movements. But can these periods…
Some traders believe they can use the phases of the moon cycle (lunar cycles), such as the full moon, to time the market and make profitable trading decisions. This has given rise to the Full Moon/Moon Phases/Lunar Cycles Trading Strategies….
Weekly RSI vs daily RSI – what is best? This is a bit like comparing apples to oranges. It might be the same indicator, but RSI can deliver substantially different risk and reward payoffs in different time frames. Risk and…