Category Archives for "Mean Reversion"
November 11, 2015
- in Mean Reversion , Stocks by Cesar Alvarez
Hi-Lo Index as a Market Timing Indicator
My strategies use a market timing indicator to tell me when I should not be trading the strategy. The blog post, Avoiding Stock Market Crashes with the Hi-Lo Index of the S&P500, presented a very simple idea of using new highs vs new lows. The post tests trading the SPY & IEF but I wanted to know how well would it work on a S&P500 mean reversion strategy.
October 21, 2015
- in Mean Reversion , Stocks by Cesar Alvarez
Biotech: My love-hate relationship
My love
My hate
The two charts above are from recent trades I have taken. Charts created in AmiBroker.
On July 20, 2015 IBB, iShares Nasdaq Biotechnology ETF, made a closing high of 398. About three months later it closed at 289 for 27% loss. A very common thing I hear from traders is that they “don’t trade biotechnology or pharmaceutical stocks.” I completely understand. These stocks tend to be very volatile and news driven. But does removing these stocks really reduce your drawdowns? What happens to your Compounded Growth Rate? Time to see what the research shows us.
September 30, 2015
- in Mean Reversion , Stocks by Cesar Alvarez
Stop Losses and Profit Targets. Plus Happy Birthday Excel!
In the post, Maximum Loss Stops: Do you really need them?, we looked at how maximum loss stops changed the results of a mean reversion strategy. At the end of the post I asked the readers to vote for what to try next. Let us see how these are ideas turn out.
September 16, 2015
- in Mean Reversion , Research , Stocks by Cesar Alvarez
The Health of Stock Mean Reversion: Reader’s Ideas
My previous post The Health of Stock Mean Reversion: Dead, Dying or Doing Just Fine generated good reader’s suggestions on other ways to check on mean reversion health. Let us see what these tests tell us.
August 19, 2015
- in Mean Reversion , Research , Stocks by Cesar Alvarez
The Health of Stock Mean Reversion: Dead, Dying or Doing Just Fine
My second post on this blog was a look at mean reversion, Is mean reversion dead? Given I am using a new data provider(Norgate Data), it has been almost two years since that post and there have been other articles on this recently, I figured it was time to check again. The research will focus on Russell 1000 stocks since 1995. The test is back to 1995 covers 3 bull markets and 2 bear markets.
August 5, 2015
- in Mean Reversion , Research , Stocks by Cesar Alvarez
Maximum Loss Stops: Do you really need them?
We hear it all the time. “You must use stops.” And most of us use them. But do you know how they change your strategy results? Are they improving your results by giving you higher CAR or lower maximum drawdown? Recently I was speaking with a reader about this topic and he insisted that it you had to have stops to trade. Well, does one?
March 4, 2015
- in ETFs , Mean Reversion by Cesar Alvarez
Developing Leveraged ETF Strategies
How should one develop a strategy for leveraged ETFs? Do you develop the strategy on the unleveraged ETF and then apply the rules to the leveraged ETF? Or do you develop the strategy on the leveraged ETF directly? Or do you develop the strategy on the unleveraged ETF then use signals on that to trade the leveraged ETF? On first blush one would think that all three methods would produce identical results. But as we know, the obvious is rarely the right thing for strategy development.
November 3, 2014
- in Mean Reversion , Research , Stocks by Cesar Alvarez
Monte Carlo Analysis in AmiBroker
This post will cover in detail two different ways of doing Monte Carlo analysis and the code needed to it in AmiBroker. A reader recently sent me this article, Monte Carlo Analysis For Trading Systems. The article covers three methods of Monte Carlo analysis. One of which I had never thought about and I had to slap my head on how simple it was.
September 8, 2014
- in Mean Reversion , Stocks by Cesar Alvarez
Simple Ideas for a Mean Reversion Strategy with Good Results – Part 2
The Simple Ideas for a Mean Reversion Strategy with Good Results post generated lots of comments and emails about other ideas to try. This post will cover three of the most interesting ones.
August 11, 2014
- in Mean Reversion , Stocks by Cesar Alvarez
Simple Ideas for a Mean Reversion Strategy with Good Results
A reader sent me some trading rules he got from a newsletter from Nick Radge. He wanted to know if these rules really did as well as published in the newsletter. They seemed too simple to produce such good results. This is a basic mean reversion or pullback strategy. The strategy as presented was long and short and went on margin but he wanted to know how it did the long only since he did not short. After contacting Nick Radge at The Chartist, I confirmed with him it was OK to publish these rules.
