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. …

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…

Yesterday, Elon Musk admitted that expectations about autonomous vehicles are premature without a breakthrough in artificial intelligence. This is positive development and not negative as some may think. Realizing the problem sets the stage for the next breakthrough. …

Most enthusiasts in the crypto space perceive cryptocurrencies as a revolt against central bank policies that have created wide wealth inequality. There are both right and wrong but it is the latter that is more important. Central banks have created inequality due to their policies designed to avert a deflation…

Not only physical cash should not be terminated but there should be enough around in case of an extreme event for hedging purposes. I explain below. Lately there are signs of a push towards digital currencies mainly by the European Central Bank but also from some groups that believe these…