- VIX Redundancy October 11, 2013
I have argued in the past that VIX, for all practical purposes, tracks the inverse S&P 500 index. Actually, there are much better technical indicators of volatility, like for example the Average True Range (ATR) measure. It is shown here that VIX ...
- Volatility is Not Always Related to High Risk October 3, 2013
In the last 20 years the best time to buy stocks was during periods of high volatility that marked the lows of major bear markets. Yet, the timing of long entries of many investment models is based on low volatility, ...
- Walk-Forward Trading System Synthesis and the Importance of Old Data September 18, 2013
This article introduces the process of Walk-Forward Trading System Synthesis™. I show with an example that in the case of price patterns this process may not offer any advantages over the traditional Trading System Synthesis process that uses the whole available in-sample of ...
- Software to Trade Like a Quant Hedge Fund September 11, 2013
Price Action Lab (PAL) is a software program used by quantitative traders and hedge funds around the world for algo discovery and discretionary trading. This article lists the main features of PAL. Price Action Lab has three main functions: search for price patterns, scan for price patterns ...
- Practical Position Sizing Based on the Risk Ratio September 7, 2013
In the blogosphere and elsewhere one can find many articles about optimal position sizing and on maximizing equity growth via the use of fancy math, for example the Kelly ratio.
- Descriptive Statistics In The Financial Blogosphere August 30, 2013
Anyone using excel can generate descriptive statistics based on market data, such as the mean, standard deviation, kurtosis and skewness of returns, or even the percentage of winning trading days after specific holidays. Such descriptive statistics are for the most part ...
- Sell In August and Go Away? Bayes’ Rule Says The Odds Are in Your Favor August 3, 2013
You are a fund manager and you are making a 30% return for the year just by employing a naive golden cross trend-following strategy. You know that if a correction begins now, maybe up to 7% or even more may ...
- Chart Illusions July 25, 2013
I have talked about the significant variations between unadjusted and dividend adjusted stock charts, as well as between continuous and adjusted futures charts, and how they can lead to very different inferences in the context of classical technical analysis. This empirical ...
- A New Challenge to Classical Chart Analysis July 19, 2013
In the recent past classical chart analysis has produced some major failures, including that of the notorious complex top in bonds in the beginning of 2012 that failed miserably, causing devastation to bond bears and another blow to this ambiguous practice. There is another challenge ...
- An Example of Selection Bias in Pattern Analysis July 12, 2013
The 5-day winning streak in S&P 500 and SPY is a pattern easy to spot on a daily chart but any inferences about the future direction of the market based on only this pattern are based on selection bias. There ...
