trading strategies with statistical edge

Trades that Cause a Quantitative Edge

My approach to trading is supported math and statistics. Every stock picking I make is supported the statistical research I've done. This pageboy gives some specifics about what I've found from my explore.

First, there are a ton of trading strategies that don't actually have historical profitability. I've tested at least 5,000 different trading strategy ideas against diachronic information, and the vast majority would not have generated a meaty turn a profit. One way to interpret this is that overall there appears to be a spate of random "noise" in the market.

Also, when I take inferior time frames (like trades lasting honorable a few minutes or few hours), there is a LOT more stochastic randomness than along larger sentence frames. I found very hardly a trading strategies with clear edges on the smaller meter frames. That's a big grounds why I don't mean solar day trade; I don't have any statistical evidence from historical price data that shows a mechanical trading approach can engender consistent profits.

Another key realization is that the marketplace's shape has a giant result on which trading strategies have edge. For representative, if we're in a bear food market, many an optimistic strategies perform very poorly.

One more over-arching fact we depend on: over time, the U.S. stock grocery goes high. Information technology's been doing IT for more 100 old age. There are for sure periods where it has setbacks, but overnight terminal figure this thing goes up.

Those are the key points of the framework I practice for trading.

If there is a portion of random noise in the grocery, even for trades along longer time frames, you mightiness be wondering what on the dot are the edges that I've saved. What trading strategies could be used where there is clear evidence of repeated profitability throughout chronicle?

Well this Page that talks well-nig my favorite trading edge will fall in you a good deal of insights on one great lesson. Thereon pageboy I lay aside out an example of an edge that has stood finished to the test of time, in the form of back tests, and that I feel very wide relying along.

That's an deterrent example of just one trading strategy in my portfolio. But in general, my strategies "lean long" (which means that I buy more than I stubby), because accordant to historical price data, that's what pays disconnected.

And I typically only hold for about a workweek happening fair. The reason is because the further out you try to predict the price movement, the harder IT is to nail down a chance with some degree of sureness. So my trades are swing trades, but they'ray on the shorter end of the spectrum typically.

Now keep in mind that when I articulate these trades having a historical edge, it means that when I tend my trade strategies done back tests, they are profitable. When I say I did a "back try", it way that I took my trading strategies and applied them against liberal arts neckcloth market activity to see how the trades could have performed. The results of the back tests are not live on trading results. These results sure enough bash not guarantee future results. Get word my disclaimer here.

The beauty of intentional that you're trading a strategy that has a historical edge is that it feels almost like you're the house in a gambling casino. The house always has the edge when it comes to slot machines for example. In the big picture, they'Ra going away to walk off winners because statistically they have the edge.

Sure, it's true that casinos have some days where a gambler volition win big connected the slots, and it's a type of "drawdown" for the casino. But they know they've got the edge statistically and that it's a numbers game, and for them over time the more multiplication those slots grow played, the more their expected gain is.

And that's what it's the like for me when I trade with these quantitative historical edges keister Maine. I take my lumps all one time in a spell, just corresponding a casino, but I can rest assured that in the end I have the margin on my side and that the more trades I make with edge, the more my expected profit is. I toilet't gues trading any other mode at this point!

Of course casinos have edges shapely into their systems, thusly they'Ra likely much Sir Thomas More predictable than what I've found in my pedigree marketing research. So it's not exactly corresponding the edge a cassino has because it probably isn't as predictable. But if there is a price blueprint that has repeated over and complete passim history, that to me signifies that the betting odds would be in my favor now and again when it starts to go on in the future.

If you want to join my trading journey and get my trade alerts, and so hop alongside.

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