Premium Market Analysis, Trader Education, Software, and Trading Strategies. Thirty Years Of Skin In The Game

Free Blog

  • 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 ...

  • Charts Are Never Bullish or Bearish – People Are July 5, 2013

    Charts reflect past price action that was driven by fundamentals and expectations. These two fundamental drivers of price can change anytime and as a result prices may suddenly reverse course. Those who think that charts can be bullish or bearish and base their ...

  • The Passive Indexing Buy and Hold Crowd Should Reconsider June 28, 2013

    They should reconsider their unreasonable stand against active management after taking a closer look at the enclosed chart. In my opinion, 15 trades in 13.5 years are not such a big deal for the type of dramatic improvement in returns. ...

  • The Art and Science of Price Action Analysis June 2, 2013

    Many traders think that price action analysis is the visual examination of charts for patterns of price and indicators. But the visual examination of charts mostly projects cognitive biases on price action and facilitates selection of conditions that support subjective views about market direction. There are many objective ways ...

  • Fooled By Out of Sample Testing May 28, 2013

    Developing trading systems on an in-sample of historical data and then testing the results on an out-of-sample is a widely used practice that hides some fundamental flaws. In this article I list some of the problems that may arise from the wrong application of ...

  • The Stock Market Has Been Very Generous to Gamblers May 24, 2013

    Simulations of a random system since SPY inception show that nearly 35% of random traders, human or automated, have made some profit. However, only 1% of random traders were lucky enough to exceed the buy and hold return with dividend ...

  • Fooled by Random Backtesting May 20, 2013

    Backtesting trading systems on historical data is again becoming popular almost 30 years after it started being used by individual traders due to recent advances in web technology and server speed that allows its online implementation.