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A Flexible Trailing Stop Function

The Anatomy of a Stop A stop can be defined by specifying four basic parameters, illustrated in Figure 1 below: Price Reference: The price from which the stop is offset (white line) to create a stop value. Stop Offset: The distance from the Price Reference to the stop value. Price Trigger: The value of price […]

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Stops – When Not to Use Them

Cartoon Man Stop Sign

Using a stop on a position is a very popular risk management technique used by traders. My research and experience has led me to believe they are appropriate for some – but not all – types of trades. Today I will discuss when I believe they aren’t appropriate. In Larry Connors’ new book, “Short-term Trading […]

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Part 2: Using a Self-Similarity Metric with Intraday Data to Define Market Regimes

buy and sell signals

The Self-Similarity metric has been a popular series. Recently the original post was shared on Jeff Swanson’s popular site, System Trader Success which covers a wide variety of thought-provoking articles on trading system development and is worth reading. Jeff has also posted some TradeStation codes for the indicator which some readers may find valuable. In […]

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9 Mistakes Quants Make that Cause Backtests to Lie

              “I’ve never seen a bad backtest” — Dimitris Melas, head of research at MSCI. About backtests A backtest is a simulation of a trading strategy used to evaluate how effective the strategy might have been if it was traded historically. Backtestesting is used by hedge funds and other […]

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Are your backtest results fooling you?

Fool

Have you ever started trading a strategy that performs well in the backtests but delivers a very different result when you begin trading it with real money? Could your backtest reports be fooling you by indicating a strategy is great but really only showing you part of the overall picture? How do you give yourself a better chance […]

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Are you losing when you should be winning? Here’s something you might be missing

Most people think about where to get into and out of positions. Nearly all traders know how important it is to follow their rules, and the majority of them always work toward being more disciplined. These are important pieces of a successful investment strategy, and most traders work on these things. But there’s one thing […]

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How to Trade the MACD: A High-level Analysis of the MACD Line Feature

Moving Average Convergence Divergence (MACD) is one of the most popular technical indicators used by traders. It is a flexible indicator that can be used for determining the strength and direction of a trend. It has three distinct features and in this first post we are going to do a high-level analysis of one of those […]

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Using a Self-Similarity Metric with Intraday Data to Define Market Regimes

The images above are the famous Sierpinski Triangle and the Koch Snowflake. These objects are “self-similar” and this means that examination at finer levels of resolution will reveal the same shape. Both are examples of “fractal” geometry, and are characteristic of many phenomena in the natural world such as mountains, crystals, and gases. Self-similar objects […]

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Backtesting A Basic ETF Rotation System in Excel – Free Download

Some Background: Let’s face it, technology has made it possible to access a wide range of tools for developing, backtesting, and optimizing systems. However, a simple (but powerful) tool like Excel is a great way to validate a trading system. In this example we’re going to be keeping things really simple and backtesting a monthly […]

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Distance Weighted Moving Averages (DWMA and IDWMA)

The distance weighted moving average is another nonlinear filter that provides the basis for further research and exploration. In its traditional form, a distance weighted moving average (DWMA) is designed to be a robust version of a moving average to reduce the impact of outliers. Here is the calculation from the Encyclopedia of Math: Notice […]

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