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This trend-following trading system is based on an algorithm that adapts to market conditions and it is significant at the 99.86% level in the case of SPY based on the performance results obtained from 20,000 simulations of a random system. There ...

Suppose a trader has purposely used a random system to trade SPY since its inception. What was the probability to make annually more than the buy and hold return? Or suppose a trader has worked hard to develop a trading system that generated a positive ...

Many have claimed success trend-following the markets. But a fair assessment of the situation requires to also count those who got ruined by it and this is not easy.

Selection and data-mining bias in trading system development often lead to random results.

I have heard a lot of arguments in favor or against active fund management and passive investing. I present data here that strongly suggest that passive investing in stock indices should be actually treated as an alternative investment that involves substantial risks, or ...

Joe has thought of a way that combines technical analysis indicators, exit signals, and filters of all kinds and also optimizes performance by selecting the best parameters. He further thought that if this is done in-sample historical data, followed by ...

If in business school you were taught that high positive correlation means that when one security moves, either up or down, the other security moves in lockstep in the same direction and that high anti-correlation means that when one security moves, ...

Despite the fat tails and especially the one on the left side that includes one very rare event and a few other not so very rare, the distribution of S&P 500 daily returns is  as good as it can get in a ...

In this post I introduce the general form of the Backtesting Robustness Index (BRI) I have developed and I give an example of its application to price patterns. This robustness index provides just another way of dealing with the notorious problems ...

Some traders base their trading decisions on the fallacy of the maturity of chances, also known as gambler’s fallacy. This fallacy is the expectation that the market will correct when indicators like the Relative Strength Index (RSI) assume extreme values. However, any extreme values of such ...