Tag Archives: serial correlation
After reading recent articles in financial and social media, one may get the impression that prolonged overbought conditions in the stock market are a recent phenomenon, usually attributed to central bank manipulation and herd behavior. These are false impressions according to … Continue reading
The popular rule “the trend is your friend” worked well in the past but during this year it has been challenged by erratic price action and swings. This could be a temporary phenomenon and momentum traders are not ready to … Continue reading
Arguments in support of trend-following usually rest on performance achieved by the CTA group in the 1990s. Recent performance of this group has deteriorated due to changes in market dynamics. Trend-following of equity indexes has performed better recently due to … Continue reading
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
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
Simple Monte Carlo analysis tools are often used to assess the risks of trading strategies and to determine appropriate capitalization levels. However, simple trade reshuffling algorithms can produce misleading results in many cases and fool their users.