Backtesting means applying a set of trading rules to historical market data to estimate how those rules would have performed in the past. Think of it as a flight simulator for traders. Instead of risking real capital on an untested…
Transitioning a trading strategy from a backtest to live trading often yields unexpected results. While backtesting provides insights, it can’t fully predict real-world performance. This article details what can you expect from a trading strategy backtest when you are trading…
Here is a Tradingview Pine Script Strategy. TradingView is a popular tool with many traders due to its vast array of tools and features. TradingView uses its native code language, Pine Script, to implement indicators and backtest trading strategies. Here…
Most traders test their trading ideas on all their available data and conclude “yes or no” to go live with the strategy. But it’s a major problem with this method: You test on known data – not unknown. Almost all…
Let’s see how to build a trading strategy based on the popular RSI indicator using TradingView (step by step) in the crypto market, from building the layout to implementing its native Pine Script language. Our RSI-based trading strategy will seek…
Tail risk is the risk of extreme losses that occur outside of the normal distribution of returns. It is also known as fat tail risk because the distribution of returns has a fatter tail than a normal distribution. Backtesting is…
There are 252 trading days per year for the U.S. stock market. The number may vary from year to year, as not every year has 252 trading days. For example, the 2020 trading year consists of 253 trading days, but…
Quantified trading strategies are strategies based on finding inefficiencies in financial markets based on numbers, math, data, and statistics. This is done by studying historical data from the past, mostly time series of the price of financial instruments, and the…
Can you buy stocks on the weekend? Trading stocks over the weekend can be a good opportunity for professional as well as part-time traders to brush up their skills while maximizing their returns. Yes, traders can trade stocks over the…
Survivorship bias in trading and backtesting is about the things we don’t see or to a certain degree ignore. We tend to see the winners and not the losers. Unfortunately, this is very typical in trading and backtesting. To avoid…
To succeed at trading, you must ensure you have a positive statistical expectancy and the ability to follow the strategy. What is statistical expectancy? Simply put, it’s the probability that your trading strategy will produce a profit over a large…
Trading Strategy Optimization, is it good for trading? Are optimizers error maximizes? Do small input errors result in large output errors? Stay tuned, and you’ll find out why trading strategy optimization is smart – when you know what you are…
In financial trading, as with most aspects of life, everything is getting automated, thanks to advances in artificial intelligence and machine learning. From vital signs in cardiology practice to price changes in the financial market, people are building systems that…
Curve fitting is when a strategy or edge is not fit to market behavior, but market noise, leading to failure in live trading. Curve fitting (overfitting) is overoptimization that is unlikely to fit into future unknown data. You have probably…
ChatGPT has been on everyone’s mind lately. People are discussing how it can improve productivity or help you solve programming bugs. But can ChatGPT be used for backtesting? ChatGPT can be helpful in trading as a tool for analyzing market…
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…
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,…
Backtesting a futures strategy is one of those essential practices that can make the difference between consistent gains and unexpected losses in the fast-paced world of trading. Imagine having a roadmap that shows how your ideas would have played out…
Seeking to invest smartly in the markets? Backtesting is your first step — a method to trial trading strategies with past market data before risking actual money. This article unpacks backtesting from A to Z, teaching you how to employ…
Monte Carlo simulation in trading and investing is a tool frequently used in blogs and backtests. Can Monte Carlo backtesting be used to measure risk and uncertainty? Yes, it turns out you can use it in the financial markets: Monte…
I record every trade I make in Excel. I categorize them into short/long, which day of the week, date, where the market opened, how the market performed the day before, how the stock performed the day before, average volume in…
To become a 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 an interest in…
Backtesting is among the most valuable tools available to today’s traders. By applying a trading idea to historical market data, you can estimate how it might have performed before committing real capital. This process not only highlights potential returns but,…
Seeking to invest smartly in the markets? Backtesting is your first step — a method to trial trading strategies with past market data before risking actual money. This article unpacks backtesting from A to Z, teaching you how to employ…
