Originally published in Price Action Lab Blog. All traders do not have the same preferences for trading strategies, and these may change over time. Depending on their style, traders favor different strategies. …

The year-long M6 competition has ended. In this article, I include my opinions about the competition, and investment competitions in general, and an analysis of the results. About Investment Competitions In my opinion, investment or trading competitions with no money at stake are akin to paper trading and the results may not be…

Simplicity wins when it is compatible with the market dynamics. This is the case with the B2S2 strategy for trading Dow 30 stocks. Despite the strategy being long-only and having no filters and no parameters to optimize, it is up nearly 8% year-to-date. The B2S2 strategy is based on a…

All attention this year has been on trend-following and the large returns of CTAs and ETFs tracking CTA indexes. Our PSI5TF trend-following strategy is up about 30% year-to-date.

Successful identification of outliers in market price action is important for trader profitability. After an introduction to the challenges of identifying anomalies and outliers, we discuss a process that applies to short-term trading. A market outlier is an event or signal, which is often the outcome of an anomaly in…

Look-ahead bias in backtests is the result of using information that would not normally be available for the execution of a signal when it occurs. The information can be about price, past or future, or fundamental data. This is just one form of bias that can be found in backtest…

There are advanced definitions of probability and even versions with negative values but for the purpose of this thread, I’ll concentrate on the basic level. Axiomatic definition. I. P(α) ≥ 0 II. The probability of a certain event equals 1 III. If two events α and β are mutually exclusive, then P(α+…

What is the proper way of gauging the state of the market? I will start with the wrong ways of doing it, a non-exhaustive list: Drawing lines on charts, for example, trendlines. Trying to identify chart patterns, like a head and shoulders. Dividing the price of one security by the…

According to Wikipedia, cognitive biases are systematic patterns of deviation from norm and/or rationality in judgment. They are often studied in psychology and behavioral economics. The Resolve Asset Management Riffs last Friday, June 11, 2021, had a interesting discussion with Annie Duke on Biases and Optimal Decision Making in Markets…