October 10, 2016

Presenting in Dallas and Austin, Texas

I will be in Texas next week giving presentations. Click the links below for more details. I hope to see some readers there.

October 17, 2016 Austin Market Technicians Association

For more information see https://www.mta.org/event-registration/austin-chapter-meeting-featuring-cesar-alvarez/


October 18, 2016 Dallas Association for Technical Analysis

For more information see http://www.afta-dfw.org/schedule.htm meeting #2.


Good quant trading,

September 28, 2016

Taming High Return and High Risk

I was at a recent talk of the Northwest Traders and Technical Analysts group where they presented a VXX strategy with some huge return and drawdown numbers. Trading this would be very difficult. This got me thinking. If I had a strategy like this, how could I tame the numbers? Through the years, I have seen various ideas about how to do this but never looked into it. Searching the web one can find various volatility ETF strategies with very high returns and high drawdowns. I found one that looked interesting and had lots of potential for optimization and improvement. Then, I optimized the hell out of it searching for a variation with over 100% CAGR. I found one but I would never trade it because I over fit the data. I needed to something to work with.

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September 12, 2016

Ask Me Anything Video for 9/12/2016

In this short five minute video I will answer the following questions:

  • I am interested in knowing a little bit more about your own trading. What types of strategies are you trading?
  • Why do you not manage outside money?
  • What are the trading books you recommend?

Do you have a trading or AmiBroker or other question you want me to answer? If so, either add it to the comments below or fill in the form.

Send me your question.

Only Question filled required.

Your email is protected. I hate spam as much as you do. Well, I do like the kind you eat.

Good Quant Trading,

September 7, 2016

Strategy Up/Down Capture

A reader sent this interesting link about Up/Down Capture. The great part about this article it is something I have intuitively known about my trading strategies but never tried to quantify. This was the bump I needed to investigate this concept. When the SPY moves up on average how much does my strategy profit? When the SPY moves down how much does my strategy lose? I had fun creating an interactive spreadsheet where you can change the numbers and see the results for your own strategy. This is one of the best spreadsheets I have done for the site.

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August 24, 2016

Cesar’s Ask Me Anything Webinars

To those on my new blog notification list, I sent out the opportunity to join me in a one hour webinar where people could ask me anything about trading. I had a ton of fun answering lots of great questions. See the bottom of the post for links to download the mp3 files of the webinars.

Some questions, I answered are:

  • What types of strategies are you trading?
  • How long a period of underperformance you would tolerate?
  • How do we know that we have a robust system? Walkforward vs Monte Carlo vs SPR vs other?
  • Why do you not manage outside money?
  • Am I mistaken that you don’t prefer trading trend following or momentum based systems/strategies. Can you explain why?
  • How do you come up with the underlying idea for a brand new trading strategy?
  • And many more great questions!

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Start Dates, Correlation and Random Strategy

In my last post I showed research on how optimization results can be mean reverting. Sometimes, my research keeps getting side tracked as I think of random ideas to look at. In this post, we look at the random walk my research took starting from my mean reverting optimization research. I will show how changing the start date can have a big change in the results, correlation of 1990’s to now, and random data and how it correlates.

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Mean Reversion and the Broken Rubber Band

A common way to describe a mean reversion trade is a rubber band that stretches away and then snaps back. Something that Steve, my trading buddy, and I discuss when a trade keeps going against us is that the rubber band has broken. I have never tested that concept. Meaning after N day sell-off, are we now more likely to continue to sell off than bounce? Doing research is not always about trying to develop a new strategy but sometimes it is testing a concept. The concept may lead to a new trading idea.

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ConnorsRSI Analysis

A couple posts ago, I did the RSI Analysis. This post will focus on ConnorsRSI which I created while working for Larry Connors. When  creating the indicator, the focus was on short-term mean-reversion results. We will look at that here but also how does it handle longer-term holds. Since I did not test this when I originally did the work, I was looking forward to seeing the results.


ConnorsRSI is an indicator made up of three components. The first being a 3 period RSI on the closes. The second being a 2 period RSI applied to the current up/down streak. The last being a rank of how big today’s move is. Then a simple weighted aveage is used to combine them. For more details on the calculation and how to use it see this link.

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