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,…
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…
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…
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…
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…
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…
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…
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…
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…
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…
If you have come so far in your trading that you rely on backtesting to validate your trading strategies, you definitely are ahead of the masses. Most people haven’t understood that all strategies and patterns they want to trade need…
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…
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…
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…
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…
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…
Quant trading works because it’s based on objective and backtested trading rules. We believe it is the correct way to approach short-term trading. Even better, we believe it potentially can work for anyone who is a keen learner – you…
Determining your S&P 500 investment returns is crucial for financial planning. Using our s p 500 return calculator, you can gauge both historical performance and future potential. This article guides you through the process, ensuring you maximize the tool for…
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…
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…
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…
When it comes to trading, you can either use mechanical trading strategies or discretionary trading strategies. What is the difference, and which is better? Let’s find out. Mechanical trading strategies refer to automated trading using trading algorithms with pre-set instructions….
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…
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…
