Some investors believe that lower price stocks produce better investment returns than higher priced stocks. It’s always tempting to look at stocks trading under $10 in the hope of finding a ten or twenty bagger. In some ways this makes sense. Higher priced stocks are often larger and more mature businesses that grow more slowly. Low […]
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20 Technical Analysis Patterns You Need To Know
Technical analysis is a highly debated subject because academics say that markets are too efficient to be predicted by simple patterns or indicators on a chart. For some, the whole concept of technical analysis is a fool’s errand. However, this viewpoint is not completely accurate. The truth is that technical analysis is such a broad […]
13 Reasons You Should Learn The Amibroker Custom Backtest
This week we published another new course to Marwood Research called Amibroker CBT Intensive. This class teaches you how to use the Amibroker custom backtester (CBT). The Amibroker CBT can be difficult to grasp at first but it offers the ability to take complete control of the backtesting process. In other words, you can create […]
Should You Buy 52-Week Low Stocks?
Whatever your investing style it’s useful to have a way to whittle down the thousands of available stocks to a more manageable number. Over the years, I’ve listened to many investors explain how they do it. Often, the first step is to look at the Wall Street Journal for stocks near 52-week lows or 52-week […]
5 Things You Learn From Backtesting Trading Strategies
When people talk about backtesting their minds often turn to formulas and equity curves. Some may even be drawn to data mining or curve fitting, things that can go wrong. But backtesting is not just a way to test the profitability of a trading signal. In fact, backtesting has taught me many important lessons about […]
Should You Invest In Dividend Aristocrats?
Dividend Aristocrats are stocks from the S&P 500 that have managed to increase their dividends for 25 consecutive years or more. They are typically large, blue-chip companies with a market cap of at least $3 billion. One example of a Dividend Aristocrat is Johnson & Johnson (JNJ) which has 57 years of consecutive dividend increases. […]
The Problem With PE Ratios
One of the biggest mistakes I see new investors make is their use of the PE ratio. The ubiquitous P/E ratio is typically the first metric investors learn on their journey towards financial freedom. But the P/E ratio has some significant drawbacks that you should be aware of. 1. Price is not a good measure […]
Testing Turnaround Tuesday
After a big move on a Monday you will often hear traders talk about turnaround Tuesday. The concept is very simple. When markets start the week in a big way, they will often settle down on Tuesday and put in a decent reversal. Looking at the data, we find that there is a small edge […]
10 Trading Strategies For A Bear Market
Interest rates are low, taxes are low and the stock market is firing on all cylinders. The current bull market is already the longest in history and just a few percent away from being the largest in history. But bull markets cannot last forever. Some time in the not too distant future a bear market […]
What Are The Best Performing Stocks Of The Last 20 Years?
20 years ago we were in the middle of the dotcom bubble. This was not a great time to invest since many stocks were at their peak earnings. Many never recovered and a few went bankrupt. However, some companies grew out of the rubble and posted mouth-watering returns. I decided to look at which stocks […]
Testing A Reader’s RSI Trading Strategy
A reader asked if I could backtest a trading strategy based on the RSI(2) technical indicator. Most RSI strategies trade mean reversion setups, however, this is actually a trend following strategy. The idea is to follow trends and use an RSI(2) pullback to get a better price entry. We wait for the RSI(2) to turn back […]
26 Stock Market Strategies Designed To Make You Money
The last 20 years has seen the amount of research into stock market trading strategies explode. Take a look at a website like SSRN and you’ll find thousands of academic papers investigating market anomalies. I love testing and reading about new strategies. In this post, you’ll learn about some of the most interesting strategies that […]
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 PE Ratio
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 […]
The Truth About Intraday Momentum
A few years ago an interesting paper called Market Intraday Momentum was published which revealed a simple trading edge for the S&P 500 ETF. According to the paper, the first half-hour in the S&P 500 predicts the last half-hour. So if the first half-hour is positive, the last half-hour also tends to be positive. In […]
What Is The Long Term Performance Of Microcap Stocks?
Microcap stocks are great for day traders and swing traders because of their volatility. But I wanted to know how well they perform on longer timeframes. In this article we analyse a decade of performance data to see what you can expect from investing in microcap stocks. Data Preparation To do this analysis we will […]
