Tag Archives: profit factor
The S&P 500 chart with the Profit Factor indicator for a period of 250 days shows the persistent decline in market strength since the beginning of 2014 and how crucial it is for the index to stay above current levels.
Maintaining a constant profit factor while lowering the payoff ratio requires a strategy with higher win rate. In general, high win rate strategies are more difficult to develop but when combined with lower payoff ratio usually perform better during times … Continue reading
The S&P 500 index rose to all-time highs but performance remains weak. It is possible that this was the outcome of a positive drift in random price action and a short-term reversion to the mean is near.
The coin is biased towards heads. The statistics indicate that the last three uptrends in S&P 500 were the result of a small structural bias in the order of +6%. This bias may continue in the absence of adverse developments.
In a post yesterday with the title “Gurus Achieve An Astounding 47.4% Accuracy!”, Rick Ferri discusses results about the accuracy of 68 investment gurus in a study by the CXO Advisory Group. Contrary to claims made about the significance of … Continue reading
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