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Classic trend-following appears to work well even without stop-losses, but the drawdown is higher. Classic trend-following involves one entry signal, one exit signal, and a stop-loss. According to some trend-followers, you do not need additional plumbing for trend-following; the classic method ...

Dollar-cost averaging is a controversial risk-management investment method, but unavoidable when the commitment of a large capital cannot be made. This article is about a recent discussion on social media about the merits of the method and its nature. In a ...

Passive investors in the US equity markets are the worst gamblers due to the frequent risk of uncle point in the form of large corrections. Since 1943, the S&P 500 index has been in a correction of more than 20% from ...

Lately, retail traders are being targeted by another round of hype involving high annualized returns from trading strategies that are unrealistic but relatively simple to understand and backtest. I first provide the general structure of the bogus trading strategies that are ...

My favorite trading strategy must fulfill eight criteria. In this article, I list the criteria and also briefly discuss my favorite trading strategy that meets them all. All traders do not have the same preferences for trading strategies, and these may ...

All investing and trading strategies can become chaotic and eventually cause high losses or ruin, but simpler ones can offer higher chances of longer periods of stability and profitability. The Curse of Dimensionality Richard E. Bellman, who invented dynamic programming, coined the ...

The skewness of trading strategies is an important statistic, but it makes sense when measured properly and analyzed in the proper context. What is skewness? Skewness is a measure of the symmetry of a distribution. If a distribution is normal, the skewness ...

A 9-sigma drop in the SG CTA index on March 13, 2022, coincided with a 10-sigma rise in the 2-year U.S. T-Note and caused significant losses to some managed futures CTAs. The SG CTA index is down about 5.3% year-to-date and ...

In a recent podcast, Clifford Asness, who cofounded AQR Capital Management,  mentioned three types of backtests, all quants should be aware of. The podcast was one of the best in quantitative finance and I highly recommend it. I will not say ...

Our strategy for CTA replication (REPA) does not rely on an index to replicate the performance. It is a bottom-up replication strategy instead of a top-down one. Most of the time, CTA replication strategies use statistical analysis or machine learning to ...