Category Archives: Trading System Analysis

Performance of Two Strategies in Momersion Regimes

In this blog we analyze the performance of two popular mean-reversion trading systems in momersion regimes, i.e., when there is no clear indication whether a market is driven by momentum or mean-reversion. One conclusion is that one of the systems … Continue reading

Posted in Quantitative trading, Trading System Analysis | Tagged , , | 2 Comments

Adjusted Vs. Unadjusted Data

Yes, this is a heated subject but I hope that the example from recent SPY data will convince you that there is no easy answer. Share

Posted in Quantitative trading, Trading System Analysis | Tagged , | 19 Comments

An Ominous Random Pattern

I show in the blog that the candlestick pattern known as bearish engulfing is no more than a random formation even when it occurs near 52-week highs. Although this and a host of other related patterns are useless for making … Continue reading

Posted in Technical Analysis, Trading System Analysis | Tagged , , | 5 Comments

Selection Bias and Momentum Systems

Momentum systems are popular because they are supposed to generate excess alpha at lower risk. However, as in the case with traditional trading systems, momentum represents just another method that must be tested for significance and, more importantly, for intelligence … Continue reading

Posted in Quantitative trading, Trading System Analysis, Trend following | Tagged , , , , | 22 Comments

Double Inside Day in S&P 500

The double inside day is a simple symmetrical price pattern formation that is not very common. It signifies times of extreme uncertainty, often close to key pivot point. Backtests show that this pattern has no clear directional bias. Share

Posted in Technical Analysis, Trading System Analysis | Tagged | 2 Comments

Switching From Stocks to Bonds Based on a 200-day Moving Average Crossover

I offer analysis in this blog motivated by a reply to a tweet I made yesterday regarding the essence of the 200-day moving average. I show that the choice of a 200-day moving average for the purpose of stock-bond allocation is sub-optimal. … Continue reading

Posted in ETF Analysis, Quantitative trading, Trading System Analysis | Tagged , | 18 Comments

Why You Should Avoid Purchasing a Trading System

You should avoid purchasing a trading system because there is usually no way of knowing how it was developed. There are many “trading system outfits” that use data-mining to generate systems they claim are robust. However, depending on how this is done, … Continue reading

Posted in Trading System Analysis, Trading System Design, Trading System Synthesis | Tagged , , | 6 Comments