I have just published a new class called Analysis Of Entry Signals.
This is a 1-hour class where I take 40 different trading signals and analyse their profit potential on US stocks over different time horizons, spanning 2-days to two years.
The idea behind this class is to analyse a large amount of historical data to find out which entry signals work and which do not.
I have been wanting to do this analysis for some time as I want a more scientific method for filtering out opportunties. This research provides many interesting insights that can be used to better understand the market.
In total, I test 40 different trading signals including:
- New Highs
- New Lows
- ADX Indicator
- Moving Averages
- RVol (relative volume)
- Bollinger Band squeeze
- Money Flow Index
- Chaikin Volatility
- and more…
The analysis covers more than 12,000 US stocks between January 1999 to January 2021 including delisted stocks and transaction costs. Altogether, over 20 million historical trades are analysed.
The idea is to use large sample sizes to find consistent, reliable entry signals and discover what is working in today’s stock markets.
What You Will Learn
The analysis is designed to uncover market truths, discover small edges and point you in the right direction for future research.
We are analysing nothing but the pure profit potential of various indicators to see what works and what doesn’t.
This analysis does not show a complete trading strategy nor does it go into any detail about the indicators themselves or how to calculate them.
Rather, the research provides insights which could be the starting point for a more sophisticated investment strategy.
Alternatively, the signals can be used as an initial screening tool for filtering down large numbers of opportunities to a more manageable number, ready for human analysis.
For example, one of the trading signals we tested is a cross over a round number such as $1, $5 or $10.
Many traders suggest that round numbers act as important levels of interest and when these numbers are breached, good trading opportunities arrive.
We found that the signal produced a loss of -0.21% over two days suggesting it is not a reliable trading pattern with short holding lengths.
The performance did improve over 50 and 250 days where we recorded an average profit per trade of 2.9% and 16.24% respectively.
How To Access This Research
Putting together this class has been informative and I intend to do more analysis in the future including analysis of fundamental signals. Thank you for your support!
Thank You For Reading
Joe Marwood is an independent trader and the founder of Decoding Markets. He worked as a professional futures trader and has a passion for investing and building mechanical trading strategies. If you are interested in more quantitative trading strategies, investing ideas and tutorials make sure to check out our program Marwood Research.
This post expresses the opinions of the writer and is for information or entertainment purposes only. It is not a recommendation or personalised investment advice. Joe Marwood is not a registered financial advisor or certified analyst. The reader agrees to assume all risk resulting from the application of any of the information provided. Past performance, historical or simulated results are not a reliable indicator of future returns and may not account for real world settings. Financial trading is full of risk and margin trading can lead to financial losses totalling more than what is in your investment account. We take care to present accurate analysis but mistakes in backtesting and presenting of analysis regularly occur. Please read the Full disclaimer.
Thank you to everyone who takes the time to leave a comment. Your feedback, constructive criticism and identification of mistakes is welcome. In order to concentrate on work I may not have time to respond to all comments.