One of the most known factors in investing is momentum. Momentum states that an asset that has been going up is more likely to keep going up in the future than to fall. It has been widely researched by academia and proven by multiple studies that it works. However, in the short term, the story…
Mean reversion has worked very well on most Western stock indices for about four decades since the advent of futures trading. It has worked even better during the bull market after the financial crisis in 2008/09. Perhaps counterintuitive, long strategies have worked better in bear than bull markets. Please read our anatomy of a bear…
It’s possible to make Friday Jobs Report trading strategies. One of the most important macro numbers on this planet is the monthly US job report. As a bonus, at the end of this article, we provide you with the code for the monthly jobs report for both Amibroker and Tradestation (And Plain English for Python…
The end-of-month bias (effect) in stocks is well documented. But how strong is the bias? We conduct a simple test to show how strong the effect is. The return in the S&P 500 at the end of the month is so strong that it explains almost the majority of the gains over the last 22…
Instrument/asset S&P 500 (SPY) Trading rules The trading rules of the edge read like this (please also backtest yourself – you might find a way to improve it): RSI(2) is above 70; and Today is Monday; and the close is below the 200-day moving average. Results Trading performance if exit after N-days (100 000 and…
In 2022 the bond market experienced the worst drawdown in its history, and since then volatility has been off the charts. It seems like rates are moving like tech stocks did in 2000. Luckily, this can be seen through the volatility index of the bond market, the MOVE index. The MOVE index is to the…
One of the best edges in the stock market is the overnight edge – the price action from the close until tomorrow’s morning (or close). Is it still working? Can a trend filter improve performance? Empirical evidence – the overnight edge: The overnight edge is best illustrated by a simple backtest and a chart. This…
We did a backtest where we optimized the month and calendar day to find the best calendar days for the S&P 500. We backtested the result by entering at the close of calendar day N and selling at the close the next day. In other words, this is an overnight trade. The table below contains…
Today we are presenting three free mean reversion strategies. They were partially published on this website a few years back, and today we make some minor adjustments and present their performance on different ETFs. Furthermore, we discuss why mean reversion works and which markets are best for mean reversion trading strategies, and also some historical…
What happens in the coming days after a very bad Friday when the stock market goes down? Let’s backtest and find out if we can make any money from it. Friday 22nd of April was a very bad day in the stock market. The S&P 500 dropped 2.75%, something that doesn’t happen so frequently: the…
