Tag Archives: profit factor

S&P 500: Short-term Correction Is Near

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. Share

Posted in Technical Analysis | Tagged | Comments Off on S&P 500: Short-term Correction Is Near

Statistics and Lessons From the Last Three S&P 500 Uptrends

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. Share

Posted in Market Statistics | Tagged , , , | Comments Off on Statistics and Lessons From the Last Three S&P 500 Uptrends

On Investment Guru Accuracy

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

Posted in Market Statistics | Tagged , , , | Comments Off on On Investment Guru Accuracy

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

Posted in Trading System Analysis, Trend following | Tagged , , , , , | Leave a comment

Risk of Ruin For Dummies

A good percentage of  traders and investors get ruined because they are deceived into believing that they can be profitable in the longer term even if they are wrong more often than they are right provided they win multiples of what they lose, on … Continue reading

Posted in Risk Management | Tagged , , | Leave a comment

New Metrics that Make Sense are Rare

There are many metrics one can use in a search for trading systems. However, just a handful of the metrics are useful and the rest are either derivatives of them or lead to excessive curve-fitting to specific series. Some new metrics that are proposed constantly even collapse … Continue reading

Posted in Trading System Design | Tagged , | Comments Off on New Metrics that Make Sense are Rare

The Most Important Performance Measure of Trading Strategies

Shortly after my post on Kelly maximization I received a number of emails from traders who are developing systems but are, understandably so in my opinion, a bit confused about which performance criterion or criteria to use when evaluating them. I understand why those … Continue reading

Posted in Trading System Analysis, Trading System Design, Trading System Synthesis | Tagged , , , , , , | Comments Off on The Most Important Performance Measure of Trading Strategies