For this backtest, we use the IBS indicator that measures where the asset’s close in relation to the price action that week (not day!). This has proven to be a good indicator for stocks because it’s a mean reversion indicator. We want to find out the following: The markets sold off and closed at the…
We believe backtesting is crucial to have consistent success in trading. It makes you disciplined because it forces you to write down specific trading rules. This way, you can see if your strategy has a positive expectancy. We suspect most traders don’t have a positive expectancy because they use anecdotal evidence and focus more on…
Libraries are an essential part of Python that makes programming faster and easier for developers. These two qualities are especially relevant in Algorithmic Trading. That’s why, in this article, we will explore some of the best algorithmic trading libraries in Python, including those to download data, manipulate data, perform technical analysis, and backtest trading strategies….
The stock market tends to revert to its average price over time. This means that if stock prices move too far above or below their average, they are more likely to move back towards the average in the future. This is because many forces are at work in the market, including buyers and sellers, and…
The stock market has a habit of mean reversion, which means that stock prices tend to return to their average price over time. This is because there are many forces at work in the market, including both buyers and sellers, and these forces tend to balance out over time. Let’s look at the following scenario:…
OPEX, or options expiration, is the day on which stock options contracts expire. Stock options give the holder the right, but not the obligation, to buy or sell a certain number of shares of a stock at a certain price by a certain date. If an option is not exercised by the expiration date, it…
OPEX day in the stock market is the day on which most stock options expire. It typically occurs on the third Friday of each month, but it can be moved if that day is a holiday. As traders, it might be interesting to ask this: What has happened the day before options expiration day –…
The relationship between interest rates and stocks is crucial to understand if you are investing in the stock or bond market. How does the S&P 500 perform when interest rates are rising? Interest rates and the stock market have an inverse relationship. When interest rates rise, share prices fall, and vice versa. This is a…
Successful trading is based on spotting the direction the price is headed. But while the price is the ultimate factor in determining profitability, the volume of transactions can offer a clue to shifting sentiment and how the price might move. This is why a volume trading strategy can be a game-changer for you. What is…
