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. […]
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 […]
A reader asked about trading divergence so I thought I would look into it. Searching the web I found many articles that claim divergence trading is an effective way to trade stocks. However, there is very little empirical evidence provided. In this article we test several different divergence strategies and we compare our results to […]
RSI is one of the most popular technical indicators among quant traders, particularly the 2-period and 4-period RSI. Previous analysis and articles have shown how RSI(2) maintained a strong edge in stocks through most of the 2000s. The MFI indicator (money flow index) is similar to RSI but incorporates volume as well. MFI is not […]
As a trader you only need one or two good trades to pay for the whole month, sometimes the whole year. You could be treading water for weeks then you catch one big move that pays for all your losses. Because of this, trading books recommend you stay disciplined and wait patiently for only the […]
I’ve spent the weekend looking into volatility and I stumbled upon a simple but effective volatility strategy. The idea is to go long the VXX ETF when volatility is rising and go short the ETF when volatility is falling. This is the opposite to the usual approach which is to short volatility on sharp rallies. […]
The Market Meanness Index is a technical indicator developed by JCL from the Financial Hacker website. In this article we will describe what the indicator is designed to do and provide some code for Amibroker users. MMI is a statistical algorithm based on the median value of a price series. It’s purpose is to help […]
In this post I will be sharing 10 tips that can help you to build better trading strategies and become a better systematic trader. These tips contain little things that are often overlooked or ignored. They’ve helped me and many of the traders I’ve worked with.
Old school trading wisdom says you should not only buy the strongest stocks but the strongest stocks in the strongest sectors. In this article, I discuss a simple breakout system. Then I introduce a basic sector filter which improves our net profit by around 50%. Full Amibroker code is also provided.
If you want to put your money in the stock market it makes sense to first analyse the data to see whether your trading strategy is a good one or not. In this article I take a look at three technical trading strategies and see how successful they’ve been over the past 10-18 years.
Every major trend in history has begun with a breakout. However, breakouts also lead to whipsaw trades so it’s sometimes better to join a trend on a subsequent pullback. In the rest of this article I will demonstrate a very simple strategy that does just that.
In today’s blog post I take a data mining approach to find a potentially profitable trading strategy based on the movement of US treasury rates. The idea of this strategy is to find a selection of stocks that respond favourably to a downward price movement in US Treasury yields.
This post contains a detailed guide for creating a mean reversion trading strategy. You will learn what mean reversion is, how to trade it, 10 steps for building a system and a complete example of a mean reversion system. Let’s get going! Introduction The two most popular types of trading strategies are momentum and mean […]
Amibroker is an excellent tool for back testing and can also be set up for automated trading with Interactive Brokers. The basic infrastructure is to connect Amibroker to the Interactive Brokers Trader Workstation software using the Amibroker IBController plugin as a buffer.
Members of our research program at Marwood Research will know that I update the program with new trading strategies on a regular basis. Last month was Vix Trio and this month I have included another new trading system (with source code) called VWAP Pilot.