Recently a study called Bitcoin Speculation or Value Creation was published looking at how individual stocks react to the news that their firm is investing in blockchain technology. The authors found an average price gain of nearly 15% after the first announcement but this is typically followed by a price reversal over the following three […]
Stocks
26 Stock Market Strategies That Beat Buy And Hold
Profitable stock market strategies are not easy to come by. One proven path is to seek out stock market anomalies. A stock market anomaly is a rate of return or investment strategy that seems to defy the efficient market hypothesis. Today, most investors agree that markets are fairly efficient even if they don’t believe in […]
Only Optimists Make Money In Stocks
I came across the following quote on Twitter: Unless you’re a perennial short seller, pessimism about the future is of no help. Only optimists make money in the markets. D Mutukrishnan Mutukrishnan has a great way of words and I think this quote is very true. If you’re too pessimistic about the market you’re going […]
August Stock Picks And Updates: Amazon And Alibaba
First off, a few updates. You may have noticed that this website now has a shiny new name, Decoding Markets! The old one, jbmarwood.com, was too ambiguous and made me sound like an author of fantasy novels. Decoding Markets reflects the new direction that I want this blog to go in. It’s not about me, […]
Can You Improve Trend Following Strategies With Price To Earnings?
In a previous article we looked at the effects of introducing price to earnings data to a mean reversion strategy. Although the effects were quite small, we found that we could improve a simple RSI strategy by avoiding stocks with negative PE ratios. We also found that stocks with PE ratios over 15 produced higher […]
Should You Combine Trading Strategies?
The general advice with trading systems is that you should try to combine multiple trading strategies together in order to get the benefit of diversification. Having a suite of profitable trading algorithms means that you can obtain a smoother drawdown and reduce your chance of having a losing day, week, month, year. However, is it […]
Improving Mean Reversion Strategies With Price To Earnings
I’ve always wondered whether you can improve a trading strategy by including fundamentals. For example, should you trade mean reversion stocks with a low PE or a high PE? Most mean reversion strategies use technical indicators and the RSI(2) and RSI(3) indicators are particularly popular among traders. However, there isn’t much research on combining those […]
Does This Trading System Really Make 20% Per Year?
The trading website Finviz.com shows a simple strategy based on the RSI indicator with an annualised performance of 19.59% per pear. The rules are to go long a stock from the S&P 500 when RSI(5) crosses under 20 and to sell when RSI(5) crosses back over 50. The following chart shows the backtest performance published […]
Should You Ignore Financial Stocks?
The financial sector took a battering in the 2008 crash which led to at least two major headwinds for financial stocks: Financial companies became highly regulated. New laws came in that prevented banks and other institutions from making the big profits they were used to. Quantitative easing caused interest rates to drop to record lows. […]
Testing The Half Day Reversal Strategy
While browsing Quantpedia I came across another interesting trading strategy called the Half-day Reversal. This is a short-term, mean reversion strategy that buys the worst performing stocks in the S&P 500 and holds them overnight. The indicated performance is 57.7% per annum with a Sharpe ratio of 3.03. These are incredible numbers so let’s put […]
