Tag Archives: autocorrelation

Long-Term Backtests Can Be Misleading

Authors of popular books and blog articles often present long backtests of certain strategies that exhibit superb risk-adjusted performance. It is important to realize that it is highly possible that these superb results are due to market conditions that may … Continue reading

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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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RSI2 and WR2 System YTD Performance in Securities with High and Low Serial Correlation [Premium Articles]

This premium article shows specific examples that confirm findings in a recent blog regarding the impact of autocorrelation on the performance of the RSI2 and WR2 systems. For access to premium content, you must be a subscriber. Please login if you are … Continue reading

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Fooled by Persisting Market Conditions

This article is related to the previous article 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 was … Continue reading

Posted in Market Statistics, Quantitative trading, Trading Strategies, Trend following | Tagged , , | 5 Comments

Buying the Random Dips

There is a lot of cash out there and stock market dips, like the one at the open of yesterday, sometimes are perceived as great opportunities. Economic news releases are often used as excuses, in the sense of confirmation bias. This … Continue reading

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Is There Any Future in Equity Index Trend-Following?

The problem of trend following is fundamentally simple: choppy markets reduce the effectiveness of trend-following algorithms and shorter trend durations reduce their profitability. There is no need for a more sophisticated analysis. About 15 years ago I derived an equation that describes the problems … Continue reading

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