Category Archives: Market Statistics

When Random Traders Profit, It is Hard to Prove Skill

It is shown that random, long-only position trading in SPY based on a biased coin has resulted in 100% winners. The simulation results also confirm that proving trading skill requires returns in excess of buy and hold return. Share

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How to Avoid the Next Stock Market Plunge

Whether you are a longer-term investor or a technical trader it is easy to get caught in stock market plunges, such as those that occurred in 2000 and 2007 and caused drawdown levels in excess of 50%. Share

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Stocks Struggle as Fed Waits for the Trigger

The chart shows that the rise in the S&P 500 since the start of 2014 took place at falling expectation. Actually, since the financial crisis bottom, only the 2009 and 2013 uptrends were genuine according to this indicator. During the … Continue reading

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The Stock Market Trend is Still Strong According to Kelly Leverage

Optimal leverage for continuous rebalancing of a passive SPY tracking strategy is still above its longer-term mean and far from trend reversal trigger levels. Technically, this is a strong market despite the recent consolidation. Share

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Fooled by Persisting Market Conditions

This blog is related to the previous blog on the RSI(2) but also conveys a much more general message about the impact of persisting market conditions and how they can fool trading system developers. In the case of the RSI(2) it … Continue reading

Posted in Market Statistics, Quantitative trading, Trading System Analysis, Trading System Design, Trend following | Tagged , , | 5 Comments

Stock Market Catastrophology

I am not talking about the short-term swings this blog tries to anticipate but a much more serious decline due to some unexpected event. Here are two scenarios. Share

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There is No Overnight Edge in SPY

In January of 2011 there was an article in Bespoke about an overnight edge in SPY. I responded with two articles that showed that the edge was purely hypothetical. Since then, it is not even an issue of a hypothetical … Continue reading

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