- S&P 500 Daily Returns Distribution and Statistics February 6, 2013
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 ...
- Backtesting Robustness Index February 2, 2013
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 ...
- Stock Market Gambler’s Fallacy January 30, 2013
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 ...
- The Price Action Lab SPY2p5 System Outperformed the Market in 2012 January 11, 2013
The SPY2p5 system, which was generated by Price Action Lab on April 7, 2012, outperformed the market in 2012 by a wide margin. The SPY2p5 system was developed on April 7, 2012 based on an in-sample period from the inception of SPY ...
- What Return? December 29, 2012
This is the time of the year when performance statistics are published in the blogoshpere. One of the parameters reported is the arithmetic 1-year return for stocks, commodities, currencies, funds, etc. But what return? The details of the calculations are usually left out. Here is ...
- Fundbusters December 27, 2012
The fundbusters team includes your familiar quant blogger, your local college professor and everyone else who can identify an edge and publish the results in a journal or in the blogosphere. As fundbusters get satisfaction from publishing edges rather than from using ...
- The Main Cause of Failure of Some Popular Technical Trading Methods December 21, 2012
Trend-following based on indicators and classical chart patterns are two trading methods that were developed in mid 20th century using data from the equity markets mainly. These methods worked well for an extended period of time in those markets due ...
- Price Patterns With Delayed Entry December 18, 2012
The introduction of a delay in the entry of a position after a price pattern is formed can under certain circumstances act as a filter of price corrections that often follow. In the absence of a delay, positions may suffer an immediate ...
- A Common Mistake in Calculating Correlations December 11, 2012
No information is reliable until it is checked thoroughly.
- Chaos in Technical Analysis and Backtesting – Part II: Split-adjusted Data November 27, 2012
Parts I and II of the series Chaos in Technical Analysis and Backtesting discussed some of the problems that arise in the context of technical analysis and backtesting when using split and dividend adjusted data. In this post I discuss the ...
