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 […]
How I Messed Up With Bitcoin
I thought I would write an article about bitcoin because it might be valuable to go over what happened. I bought some bitcoin in 2017 and made some money with it. In fact, percentage wise it is the best trade I have made in the past few years. However, I still think I messed up […]
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. […]
Investigating Skewness And The Lottery Effect In Stocks
The lottery effect explains our willingness to accept poor odds for a chance to win a huge sum. It’s why millions of us play Lotto or the PowerBall despite huge odds of one in 292,201,338*. We don’t mind spending a few bucks for the chance to win a gigantic sum, even though the odds are […]
