Tag Archives: trend following

A Possible Revenge of the Efficient Market Hypothesis

A virtually flat S&P 500 for 133 days this year may be an indication that the efficient market hypothesis is taking its revenge. Share

Posted in Asset Allocation, Risk Management, Trend following | Tagged , , | 2 Comments

Momersion Indicator

I introduced the notion of momersion in a recent article. In this article I present an indicator of momersion along with backtest results of basic systems. Share

Posted in Quantitative trading, Trend following | Tagged , , , | 13 Comments

Fooled by Dividend-Induced Upward Drift

The bulk of reported backtest results involving securities that pay dividends are based on adjusted data. The dividend-induced drift has a special effect on momentum models, relative or absolute. In many cases users of such models believe that their risk-adjusted … Continue reading

Posted in Asset Allocation, Quantitative trading | Tagged , , | 27 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

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Another Long Uptrend in Stocks is Unlikely to Occur in the Near Future

The last golden cross in S&P 500 occurred on January 31, 2012. The 50-dma has stayed above the 200-dma for 774 days, or more than three years. It will probably take a while to have another golden cross that lasts … Continue reading

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Why Every Trader Should Know and Understand This Formula

There is a formula that every trader should know and understand. It relates the win fraction to the profit factor and payoff ratio. An understanding of this formula can provide useful guidance about the risks  in different trading timeframes. Share

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A Trend-follower’s Nightmare

Hindsight is a trader’s worst enemy because there is no guarantee that the future will be like the past. Yet, many books and articles promote trend-following based on hindsight. This blog offers an example of how a trend-follower’s worst nightmare … Continue reading

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