Tag Archives: autocorrelation

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. This is premium content. Please login or subscribe to 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

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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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Short-term Correction is Getting Closer

The ATR(14) and the RSI(14) are near levels that in the recent past have marked the beginning of a short-term correction in the S&P 500. Share

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The Main Cause of Failure of Some Popular Technical Trading Methods

Indicator based trend following and classical chart patterns are two trading methods that were developed in mid 20th century using data from the equity markets mainly and worked well during an extended period of time in those markets due to the presence of autocorrelation. After 1998 things … Continue reading

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