What Does Correlation Mean In Trading Strategies?

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 your trading strategies perform together. The strategies should not produce negative results at the same…

Retail Stock Market Seasonality Trading Strategy

Just like we can develop seasonal trading strategies in the overall stock market, we can find potentially profitable seasonal trading strategies in the retail sector. This article presents one such opportunity. Are there any seasonalities in retail stocks? Some years ago, Jay Kaeppel published an article about retail seasonalities. Put short, the best month for…

Drawdowns In Trading (How To Prepare And Deal With It) | Meaning and definition

How to deal with drawdowns in trading is important. Why? Because a drawdown makes you fiddle, change, abandon your strategies or stop trading altogether. Thus, a good trading plan deals with drawdowns before they inevitably happen. Our anecdotal experience indicates most traders and investors (including ourselves) underestimate their risk tolerance. What looks tolerable in backtesting…

Is It Better To Trade or Invest In Stocks? (What’s The Difference?)

Is it better to trade or invest in stocks? What is the difference between investing and trading? Trading and investing are entirely different ballgames. Both have the same aim, to grow your wealth, but they have various time commitments, risk profiles, and likely outcomes. In this article, we explain the main differences between trading and…

Can You Get Rich By Quant Trading? (Tips And Tricks for Quant Traders)

There are many reasons why someone starts quant trading. Freedom, independence, wealth, and scalability are a few reasons why someone starts trading, but we suspect the drive for instant wealth is the driving force for many. Yes, independence and freedom are nice, but ultimately many want to get rich in a hurry. Is that likely…

Sharpe Ratio (Good Sharpe Ratio Examples From Our Trading Strategies) – What is it?

What is a good Sharpe ratio? Every trader is looking to find high Sharpe Ratio strategies. The Sharpe Ratio is a popular and widely used indicator for comparing the return and its risk. The name is given from its inventor, William Sharpe, who developed the ratio during the 1960s. Sharpe later won the Nobel Prize…

Profit Factor In Trading Explained (What It Is A Good Profit Factor? Examples Of Profit Factors)

We explain what a good profit factor is in trading (profit factor trading). How do you evaluate a trading strategy? In hindsight, it’s easy to judge a strategy by the result – the CAGR or the annual return. However, the profit factor is a handy tool to quantify the quality of the return and the…

How Jim Simons’ Trading Strategies Made 66% A Year (The Medallion Fund’s Strategies)

Jim Simons recently stepped back as the chairman of Renaissance Technologies, the asset management group that manages the most profitable fund ever: The Medallion Fund. What are the secrets and trading lessons of the Medallion Fund’s trading strategies? How has Jim Simons managed to get a whopping 66% return on average for over 30 years?…

Larry Connors’ Multiple Days Up And Multiple Days Down | Trading Strategies

Chapter 6 of Larry Connors‘ High Probability Trading contains a trading strategy called Multiple Days Up (MDU) And Multiple Days Down (MDD). The book was published in 2009, the trading tests were done until 31st of December 2008, and it’s time to test and check how the strategy has performed since then. You can find…

How To Become A Successful Quant Trader (Can You Be A Quant?)

How to become a successful quant trader To become a very successful and profitable quant trader is difficult and takes years of experience with trial and error. It’s more important that you possess trading skills than coding skills. Connecting to already successful quants is a huge advantage. Having the interest and knack for numbers is…

Larry Connors’ %b Strategy (Bollinger Band) | Trading Strategies

In chapter 5 of Larry Connors‘ book High Probability Trading, published in 2009, there is a trading strategy called %b strategy. The book contains many strategies which we test in chronological order. 12 years have passed since the book was published and it could be interesting to see if the strategies are still performing well….

Bollinger Bands Trading Strategies | Are The %B Systems Profitable? (Including Backtest And Performance)

Can we make a profitable Bollinger Bands trading strategy? The Bollinger Bands are renamed after its inventor, John Bollinger. The indicator was invented in 1980 and made John Bollinger a pretty famous trader. The bands are included in all software platforms and frequently mentioned in the financial media. What is all the fuzz about? Are…

The January Effect In The S&P 500 (Does It Still Work?)

The January effect is a well-known seasonality and anomaly. To our knowledge, it was published as a strategy for the first time in 1962, according to Victor Niederhoffer in the book The Education of a Speculator, a book any aspiring speculator should read. Does the January effect still exist? Unfortunately, the January effect seems to…

The End Of The Year Rally In Stocks (Santa Claus Rally/Effect Strategy)

Christmas Day is one of the federal holidays in the US. But how does it affect the US financial markets? Is there an end-of-year effect in stocks? Is there a Santa Claus rally in stocks? Can we develop trading strategies for this holiday season? Our backtests reveal that the stock market shows significantly better performance…

Larry Connors’ R3 Strategy (It Still Works) | Trading Strategies

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 liquid ETFs. The previous articles can be found on our page containing many different quantified…

Larry Connors’ RSI 25 & RSI 75 (It Still Works) | Trading Strategies

High Probability ETF Trading, published in 2009 and written by Larry Connors and Cesar Alvarez, contains some interesting strategies. They are all mean revertive and tested on the most popular ETFs at the time of writing, which was the end of 2008, in the middle of the GFC. Do the strategies covered in the book…

Larry Connors’ 3 Day High/Low Method Trading Strategy (Does It Still Work?)

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 well today 12 years later. Larry Connors and Cesar Alvarez published a book called High…

ADX Indicator Backtest (Trading Strategies That Work And The Best Settings)

Is it possible to use the ADX indicator to find a profitable ADX trading strategy? This article looks at the ADX indicator where we make some historical backtest to evaluate and analyze. The adx indicator was developed by Welles Wilder and released in his book in 1978 called New Concepts In Technical Trading Systems. Mr….

How To Build A Portfolio Of Trading Strategies (Why You Need It As A Trader) – [Two Examples]

A portfolio of trading strategies You need to build a portfolio of trading strategies that differ in markets, time frames, and types. Why? Because you want to have a portfolio of trading strategies that both complement each other and make the portfolio diversified and uncorrelated. In order to do this, you preferably need to test…

RSI Trading Strategies (Backtest) – How The RSI Indicator Works

This article looks at how the RSI indicator works and how you can develop an RSI trading strategy. The Relative Strength Index (RSI) was developed by Welles Wilder and first introduced in a magazine called Commodities (now Futures) in June 1978. Wilder published a book in the same year called New Concepts In Technical Trading…

The Elder Ray Indicator (With Strategies): Does It Work?

In a series of articles, we want to test different indicators and trading techniques. Almost all indicators are “proved” by anecdotal evidence, and rarely quantified. That’s perhaps not a coincidence: Most of them are useless and do not have any predictive value. We backtest some Elder Ray strategies and Our aim is to figure out…

Why Scalping Is A Waste Of Time (Do This Instead) | Is Scalping Trading Profitable? (Strategy)

This article argues why scalping is a waste of time. Why? Because you highly likely end up losing money. We don’t recommend scalping when trading. Scalping is hard and almost all scalpers end up losing. Scalping is a waste of time because it involves competing with better-equipped traders and institutions and you need to deal…

What Is The Best Personality Type For Trading? (Who Succeeds As Traders – Introverts Or Extroverts)

Traders might have different personality traits. What is the best personality type for trading? Most traders focus on finding a trading edge in the market by developing good and robust trading strategies. But many neglect one other very important factor for good returns: understanding your personality type. We believe introverts are more likely to succeed…

What Are Quantified Trading Strategies? (Including A Trading Strategy)

What are quantified trading strategies? Quantified trading strategies are strategies based on finding inefficiencies in financial markets based on numbers, math, and statistics. This is done by studying historical data from the past, mostly time series of the price of financial instruments, and the aim is to detect patterns and relationships that are unlikely to…

The Internal Bar Strength (IBS) Indicator [Including Quantified Strategies]

The Internal Bar Strength indicator (IBS) has worked remarkably well for over two decades. We can only guess why, but the stock market has been highly mean-reverting during this period, and this has of course given the IBS a nice tailwind. IBS is simply an indicator where you buy on weakness and sell on strength,…

Fear In Trading – Is It Good Or Bad For A Trader? (How To Overcome Trading Fears)

Fear In Trading. How to overcome trading fear? The markets are a battle and you need to have detachment to money to succeed. The balance between fear and greed is a thin one. We believe fear in trading in moderate doses is very healthy. How do you overcome excessive fear in trading? Trade smaller than…