Post Tagged with: "trading strategy"

Market Seasonality Study

November 28, 2016 5:00 am8 comments

November is almost over and it’s often stated that November is the start of a historically strong period for the U.S. markets. This is a well known seasonality period which runs from November to May. Look back, it sure seems true this time around. In this article I would like to take a closer look at the seasonality bias which so many investors and traders talk about.  Seasonality Bias First, I would like to test the popular trading idea of buying the S&P in November and selling in May. I will test this on the cash market going back to 1983. The number of shares to buy will be adjusted based upon a fixed amount of risk. In this case, $5,000 is risked per […]

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A Complementary Approach To Trading Technical Indicators

October 26, 2015 5:00 am5 comments

In the October issue of Futures magazine author Jean Folger discusses an important aspect when selecting two or more indicators when developing a trading system. While I don’t recommend simply combining indicators to create a trading system, and I don’t think that’s what Folger is suggesting either, when there comes a time to introduce two or more technical indicators to a trading system, this is when Folger’s advice is relevant. The author highlights a common mistake when selecting two or more indicators that could really hinder the performance of your system. By following Folder’s advice you can multiply the effectiveness of your system by selecting two or more indicators when done properly. Types of Indicators When it comes to technical indicators we are talking about mathematical formulas that are applied to price or volume. These technical indicators include MACD, Moving Averages, […]

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The Death Cross – What You Need To Know

September 7, 2015 5:00 am0 comments

How well does the Death Cross or the Golden Cross predict future market behavior? One way to see is to create a simple trading system based upon the the Death Cross and Golden Cross signals. Using EasyLanguage it’s simple to create a trading system that is always in the market switching between a long position and short position based upon a moving average crossover. Check out the performance summary. You might be surprised!

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The Top Three Pitfalls of Stock And ETF System Development

August 24, 2015 5:00 am0 comments

During my nearly 25 years of experience in the trading business, I have talked to many traders about system development. Futures trading systems and back-adjusted contacts are fairly well understood. Recent issues with the pits closing and markets being only electronic have created some issues but it’s still relatively straight forward to design a trading system which can beat, for example, the Barclay Systematic Traders Index. I have found the same to not be true for stock and ETF systems, even though both security types are more accessible to the general public. This seems to be for several reasons. First, the standard split-adjusted data series used by itself in backtesting has severe limitations when testing on a portfolio. I’ll detail […]

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A Statistical Method For Stop Placement

March 24, 2014 5:00 am9 comments

In the September 2012 issue of Futures magazine, author Neil Rosenthal began a multi-part series on system development. During the first series Neil uses MetaTrader 4 (MT4) to code a simple system and demonstrates how he uses Excel to analyze the results as the first step to building a trading system. After discovering a market edge – what I call a key concept – Neil demonstrates his process of finding an initial hard stop value for his system. I found his method similar to what I use. I thought it would be helpful if I recount his method here. While many people focus on the specifics of a trade entry, trade exit is also vitally important. After you have discovered […]

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Predictive-Model Based Trading Systems Part II

August 19, 2013 5:00 am8 comments

The fundamental idea behind predictive modeling is indicators may contain information that can be used to predict a forward looking variable, called a target. The task of a predictive model is to find and exploit any such information. Date                           trend       volatility       day_return 19950214                 0.251          1.572                  0.144 19950215                 0.101          1.778                   0.055 19950216                -0.167   […]

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