Chart pattern recognition is one of the most popular techniques employed by chartists and technical traders; they constantly study and analyze price movements in hopes of detecting patterns that show the next most probable price movement. While there are many different types of chart formations out there, the cup and handle pattern strategy is one…
We were not able to 100% quantify a head and shoulders trading strategy. The formation is too difficult to put down into specific backtest rules. However, we were able to find some statistics done many years ago by Thomas Bulkowski and this serves as a proxy for our backtesting. Some investors and analysts turn to…
A Pair Trade in SPY And TLT (Pairs Trading Strategies). A few days ago, we witnessed major moves in both long-term Treasuries (TLT) and the S&P 500 (SPY). That is not abnormal: when the going gets tough in stocks, many investors rotate into “safe” Treasuries. We write “safe” because over the long-term, especially now, you…
Breakout trading strategies involve identifying points where the price of a stock or asset breaks through a significant level of support or resistance. Imagine a race where a runner suddenly bursts through the front of the pack – that’s like a breakout in trading. When a stock breaks past a key price level, it often…
In a previous article, we presented an S&P 500 and gold rotation strategy. Today we test a sector rotation strategy between S&P 500 and gold miners. Let’s call the strategy an S&P 500 and gold miners rotation strategy. The logic behind the strategy is based on this: The stock market has a strong seasonality from…
There are plenty of seasonalities in the markets that you can develop into seasonal trading strategies. Today we look at a seasonal trading strategy in crude oil. It turns out that all the gains in oil and energy stocks since 1986 have come from December until the end of May, while the other months have…
Many traders look at the gold and S&P 500 ratio. The ratio can be used to create sector rotation strategies are popular. One of the reasons is the anticipation of better and more efficient capital allocation, and perhaps a second aim is to reduce the drawdown. Today we backtest a strategy that rotates between the…
We have presented many XLP trading strategies over the years, and this is for a reason. The headline of this article, is XLP good for trading, deserves a big “yes”. This article argues that XLP (consumer staples) is an underappreciated trading vehicle, yet very few traders trade it. We believe this is mostly due to…
Is it possible to find market inefficiencies when trading or investing? Yes, it’s possible to find inefficiencies in the markets. However, if you want to consistently make money in the stock markets, you need to understand how the markets work. Are you the prey or the predator? Are you street smart or academic smart? Inefficiencies…
This article presents some trend following strategies on Bitcoin. Cryptocurrency markets have many of the characteristics of the commodities markets: Wild swings and gyrations, both up and down, exactly what is needed for trend following and momentum strategies. Does this mean that trend following works in bitcoin? By using simple moving averages, you manage to…
