Quantitative analysis and strategies in the financial markets
Larry Connors and Cesar Alvarez published a book called High Probability ETF Trading in 2009. All of the strategies covered in the book showed great results, but almost 12 years
Continue readingMoving averages are widely discussed and used in the media and likewise frequently used by analysts when making calls about the future. Most traders and investors have probably heard about
Continue readingThis article looks at the ADX indicator. The indicator was developed by Welles Wilder and released in his book from 1978 called New Concepts In Technical Trading Systems. Mr. Wilder
Continue readingThe most important task of a quantitative trader is to find trading edges and subsequently turn them into good stand-alone strategies. However, many traders neglect to test how those strategies
Continue readingThe 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
Continue readingAlways inverse, says the famous investor Charlie Munger, Warren Buffet’s friend and business partner. What is inverse thinking? This is when we turn a problem on its head or look
Continue readingIn 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:
Continue readingPenny stocks: Extremely inexpensive equities that are worth substantially less than what they cost. – Don Staricka Penny stocks attract a lot of attention, both among investors and traders, but
Continue readingWe don’t recommend scalping. Scalping involves competing with better-equipped traders and institutions, you need to deal with lots of randomness, and you most likely end up both wasting your time
Continue readingHaving some kind of an edge in the markets is crucial to make money. The financial markets are a competitive place where amateurs and beginners are easy prey for the
Continue readingMost traders focus on finding an edge in the market by developing good and robust trading strategies. But many neglect one other very important factor for good returns: understanding your
Continue readingThis website is all about quantified trading strategies, often called algorithmic strategies. But what exactly are quantified strategies? Quantitative/quantified trading strategies defined: Quantitative strategies are strategies based on finding inefficiencies
Continue readingThe 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,
Continue readingBack in 2016, I published an article on using short-term RSI (relative strength index) on SPY. The RSI has proven to be a valuable indicator/tool for mean reversion in the
Continue readingYesterday, the 3rd of September 2020, witnessed a pretty big drop in the stock market with Nasdaq leading the decline with a drop of 5.07%. Out of interest, I looked
Continue readingThe models that dominate all human decision-making today are duly heavy on simplistic logic, and light on magic – a spreadsheet leaves no room for miracles. But what if this
Continue readingIn a previous post, I wrote about a trader’s mindset. You have to battle the markets, of which you have no influence and control, but more importantly, you have to
Continue readingWe are now entering the best month over the last 20 years in long-term treasuries (TLT) – August. From the last closing price of July until the last in August
Continue readingI currently reread Victor Niederhoffer’s The Eduction of A Speculator. I regard this book as one of the best I have ever read. It’s not an easy read, but it
Continue readingBackground: An EU/EEA regulation called MiFID requires brokers to categorize their clients as either “retail” or “professional” in order to determine the correct level of investor protection and transparency. MiFID
Continue readingOver the last weeks I have written three articles about monthly momentum in TLT, SPY, and EEM: Monthly momentum in SPY, TLT, and EEM. Monthly momentum in SPY and TLT.
Continue readingI have over the last week written two articles about momentum: Monthly momentum in SPY, TLT, and EEM. Monthly momentum in SPY and TLT. The third looks at rotating between
Continue reading20+ treasury bonds (TLT) show a significantly different performance depending on the day of the week. Assume we start with an account worth 100 000 and hold for one day:
Continue readingSome days ago I published an article that rotates between SPY, TLT, and EEM based on monthly momentum. Today we look at a similar strategy but by excluding EEM: we
Continue readingDo stop-losses really work? We are “brainwashed” to believe that you should always have a stop in place. But, perhaps surprisingly, stop-losses normally just make a strategy perform poorly. Many
Continue readingSector rotation is popular and this is not without merit. The idea is to be in the sector that shows the best recent momentum. Momentum strategies are one of the
Continue readingNo matter how good strategies you have, they are most likely worthless if you can’t execute them properly. What looks like a piece of cake in a backtest, is completely
Continue readingBelow is a simple and easy trading strategy to implement in SPY or the S&P 500: IBS (internal bar strength) must be lower than 0.25 (using daily bars). RSI (21)
Continue readingBelow is a simple and easy trading strategy to implement in QQQ: IBS (internal bar strength) must be lower than 0.25. RSI (5) must be below 25. If 1 and
Continue readingIn 2018 I wrote about a potential Monday/Tuesday trade strategy in Nasdaq (QQQ). How has this strategy performed during the Covid-19 mess? Pretty good, actually. I’ve been trading this strategy,
Continue readingMost traders and investors have heard that you need to sell in May and go away. Is this just a myth or is it correct? Three years ago I wrote
Continue readingRob Hanna at Quantifiable Edges had an interesting article some days ago about bounces in the S&P 500. I made some changes to his strategy and ended up with these
Continue readingAugust has historically provided good returns for owners of 30-year US treasuries. I read about this seasonality many years back, but I’m quite surprised it still seems to be working
Continue reading
Below is a potential short strategy in the S&P 500: Short= C>Ref(C,-1) AND Ref(C,-1)>Ref(C,-2) AND Ref(C,-2)>Ref(C,-3) AND ADX(5)>35 AND RSI(2)>90 Description: If the close is higher for the third time
Continue readingI often receive e-mails from potential traders that want to get “rich” trading. I tell them to instead consider investing their capital for long-term appreciation, preferably via passive or active
Continue reading