- Cash is the Most Robust Equity Portfolio Hedge September 29, 2023
The most robust equity portfolio hedge is cash, but for this to work, it requires timing the market. However, it is not as complicated as opponents of market timing claim. Bonds are not a hedge. Those who needed proof that bonds are ...
- Extreme Macro Causes Volatility September 24, 2023
As strange as it may seem, extreme macro calls are prevalent in the financial blogosphere and social media. These extreme calls cause volatility. Someone would think two rational macro analysts cannot have opposite but extreme views. For example, one macro analyst ...
- Trend-Following Many Markets Maximizes Sharpe September 19, 2023
As the number of markets increases, the Sharpe ratio of profitable trend-following strategies tends to increase due to decreasing volatility. Trading in many markets is essentially a Sharpe maximization strategy. Some trend-followers argue that trading many markets allows them to catch ...
- Diversification and Trend-following September 12, 2023
Portfolio diversification aims to reduce the risk of investing in any particular asset. Trend-following aims to profit from outlier trades. If a trend-follower knew beforehand which markets would generate outliers, they would also know what to only trade. Since knowledge of ...
- Positive Skew Can Hurt Returns August 31, 2023
A trade outcome distribution with a positive skew could be the result of a naïve application of a stop-loss without any regard to the underlying price action dynamics. Naïve trading strategies worked well in the 1980s and 1990s before the advent ...
- Trend-Following Is Appealing in Theory But Painful in Reality August 19, 2023
Chasing outlier trades in markets is quite appealing in theory but painful in reality, despite having gained traction in the last few years due to a rebound in trend-following CTA performance. Chasing outlier trades in markets involves taking small losses until ...
- DLPAL Software: What You Can Do With It August 10, 2023
Below is a brief account of what you can do with the two versions of DLPAL. The article was updated on August 10, 2023. Deep Learning Price Action Lab™ (DLPAL) is based on a proprietary algorithm that produces the same output ...
- Reliance on a Single Strategy Poses High Risks August 9, 2023
In trading or investing, reliance on a single strategy may result in extended periods of lackluster performance or, worse, underperformance. Traders and investors require the flexibility provided by a diverse portfolio of strategies. Buy and hold investing in the S&P 500 ...
- Strategies Fail When Market Regimes Change August 3, 2023
Strategies fail when market regimes change. I include in this article an example of a popular trading strategy for trading NASDAQ-100 stocks with excellent backtest performance for 26 years before crashing. Trading NASDAQ-100 stocks with monthly rebalancing was a popular strategy ...
- A simple trading strategy with exceptional performance August 2, 2023
This is a strategy for trading the Dow 30 stocks and SPY ETF, with no parameters to optimize and no bear market filters. Updated: September 22, 2023 Since SPY ETF inception, the simple strategy has outperformed the annualized return by a ...