Tag Archives: serial correlation

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…

Posted in Premium Content | Tagged , , , , | Leave a comment

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

Posted in Market Statistics, Quantitative trading, Trading System Analysis, Trading System Design, Trend following | Tagged , , | 5 Comments

Fooled by Monte Carlo Analysis

Simple Monte Carlo analysis tools are often used to assess the risks of trading systems and to determine appropriate capitalization levels. However, simple trade reshuffling algorithms can produce misleading results in many cases and fool their users. Share

Posted in ETF Analysis | Tagged , , | Comments Off on Fooled by Monte Carlo Analysis

Long Consolidations Within a Tight Range are Caused by Low Volatility

The S&P 500 is now in a 58-day consolidation pattern with a tight range of less than 4.5%. As it may be seen from the chart below, these long consolidations are caused by extended periods of low volatility that often … Continue reading

Posted in Market Statistics, Technical Analysis | Tagged , , | Comments Off on Long Consolidations Within a Tight Range are Caused by Low Volatility

The Four Market Shocks

In the last 63 years there have been four major shocks after which volatility increased substantially. The last shock due to the financial crisis caused a volatility increase to new highs marking an alarming trend for the future. The increased volatility and … Continue reading

Posted in Market Statistics | Tagged , , , | Leave a comment

Is the IBM Drop a Signal of a Coming Market Correction?

After a drop of 8.28% on Friday, IBM erased all of its gains for the year. Is this an advance warning that the same will happen to S&P 500 soon? Apparently, history tells us that similar drops have happened just before … Continue reading

Posted in Market Statistics, Technical Analysis | Tagged , | Leave a comment

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

Posted in Market Statistics | Tagged , , , , , | Leave a comment