Category Archives: Trading System Analysis

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

Time-Based Exits, Trend Filters and Misleading Backtests

Some technical analysts use time-based exits and trend filters in their backtests. However, these can be quite misleading if at some point in time there was a major shift in market conditions. I offer a specific example to demonstrate this … Continue reading

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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

Two-Period RSI Versus a Two-Day Losing Streak

The RSI indicator has served as the foundation of several popular short-term trading strategies over the years mainly due to its popularity. In the article I compare the results of a basic system based on a two-period RSI to those … Continue reading

Posted in Technical Analysis, Trading System Analysis | Tagged , , | 16 Comments

Let Us Toss a Biased Coin

The quantitative analysis in this blog shows that when a market has an upward structural bias, such as the S&P 500, for example, then random trading based on a biased coin guarantees positive performance over the longer-term. A large percentage … Continue reading

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Free Demo of Price Action Lab Software

There is now a free demo of Price Action Lab available for download. Price Action Lab is the most advanced software for quantitative discretionary and systematic trading based on parameter-less price patterns. Share

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Fooled by Machine Learning Applied to Trading Algo Development

The chances of finding a profitable trading algo by applying machine learning are for all practical purposes zero. There is always a small probability of success  when using machine learning but one of the problems is that the results cannot … Continue reading

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