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A Very Different Kind of Trend Model

Trend following is all about following the price. Typically the only input we need for a trend following model is the price. But what if I told that we could make a kind of trend following model which does not use the price direction as an input at all? It also has no stops and no targets. In this article, ...

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Norgate Data for RightEdge Review

I’ve written in the past about how RightEdge is one of the best simulation platforms on the market. The only issue with RightEdge is that it can be a little tricky to get started. If you’re not comfortable with programming, it’s not that easy to get your data hooked up so you can start modelling. Perhaps the new RightEdge plugin for ...

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You can’t beat all the chimps

It is a long established fact that a reasonably well behaved chimp throwing darts at a list of stocks can outperform most professional asset managers. While there would be obvious advantages with hiring chimps over hedge fund traders, such as lower salaries and better manners, there are also a few practical obstacles to such hiring practices. For those asset management ...

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True Alpha – How the CLENOW portfolio makes a fool out of the S&P 500

Beating the index isn’t really all that hard. I’m going to show you a great way to beat the market while having some fun in the process. This is a brand new way of managing portfolios, and I’m going to explain every detail of it. The True Alpha method is easy to trade and is unique in offering personalized vanity ...

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How to make proper equity simulations on a budget – Part 2 Software

Your choice of simulation software can have a greater impact than you may think. Most simulation platforms that are priced within reach for hobby traders and even smaller asset managers are quite frankly junk. If you start modeling in those environments, you will most likely either need to throw it all out and start over later, or accept massive error factors. ...

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How to make proper equity simulations on a budget – Part 1 Data

Simulating an equity strategy is difficult. Much more so than simulating a futures strategy. There’s a lot more moving parts to care about. Much more complexity. All too often, I see articles and books that just skipped the difficult parts. Either they didn’t understand it, or they hoped it wouldn’t matter. It does. When I set out to write Stocks ...

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A Random Ass Kicking of Wall Street

A random number generator can beat your mutual fund. Given a choice between a random portfolio and a mutual fund, I’ll go with the randomizer every day of the week and twice on Sundays. You think I’m joking? I’m not joking. Trashing the mutual fund industry is almost like beating a dead horse. Except of course that it’s a thriving, ...

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Beware of Trading Quotes

Retail traders love quotes. Boiling something down to a single sentence makes it appear as a universal truth. A physical law that cannot be broken. It’s a great way to reduce critical thinking. After all, if George Soros said something, it surely must be true. The guy is a billionaire and couldn’t possibly be wrong. Quotes are useless. Pay no ...

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The Stock Investing Illusion

Most people trade stocks because it seems easy. We all know what companies do and how they stock work. At least, that’s what most people would think. It’s a dangerous and deceptive illusion. Equities seem attractive for two reasons. First because they appear simple, and second because of the common belief that stocks always appreciate over time. Both of these points ...

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Stocks on the Move is Out!

A year ago I wrote an article about why trend following doesn’t work on stocks. That article surprised many people. After all, I was mostly known for writing a book about trend following on futures. Why would I diss trend following? And why does a futures guy talk about stocks? The fact is that I’ve been working with stocks longer ...

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Why I am Self Publishing my New Trading Book

I’m one of the top 5% best selling trading book authors in the world. My first book was a run-away success. And yet I’m about to self publish my next work. Why would an established author want to self publish? There is an unjustified perception that self publishing means poor quality. Let me tell you why that’s not necessarily true. Publishing ...

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Mutually Assured Destruction

Almost all mutual funds in the world fail to do their job. You’ll find better odds at the racing track than you will buying mutual funds. So why do people still buy them? Almost everyone in the developed world has a stake in a mutual fund. Even if you didn’t actively buy into any mutual fund, your pension fund is ...

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Why managing your own money is a bad trade

A great trader who decides to manage just his own money made a poor trading decision. If you trade anyhow it’s irrational not to manage other people’s money. Living the dream Ok, let’s back up a few steps. Let’s assume that you’ve been trading for a while and you’re getting comfortable doing it. Perhaps you’re becoming pretty good or even ...

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Why I’m not renewing my MTA membership

I’m a member of the Market Technicians Association (MTA) and a holder of their Chartered Market Technician (CMT) certification. But not for long. I had a good reason for joining and I have an even better reason for leaving. What I actually lack a good explanation for is why I remained a member for so long time. The MTA is ...

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Are you trading or gambling?

Do you want to be a gambler or a professional trader? I’m guessing most people who read this would prefer the latter. But are you sure that you’re not a closet gambler? I used to read a lot of trading books. Back in the early 90’s I started the habit of reading large volumes of trading books. I read everything. ...

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Is your risk random?

Your trading model might have a random risk element and you might not even be aware of it. In particular longer term models need special care to avoid ending up with random risk. The world doesn’t stop spinning when you open a position. The assumptions you used when opening your position may not be valid a week later. Even less so ...

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A Counter Trend Indicator: Profit from Trend Followers’ Weakness

A good indicator is based on sound logic. It should try to quantify or visualize a concept that makes sense and is easily explainable. Mostly I use very simple indicators. The most basic of indicators can be very helpful if used rightly. The indicator I’m about to describe here is quite simple in concept but requires a few more steps ...

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Why technical analysis is shunned by professionals

The poor reputation of technical analysis is well deserved. It’s their own fault really. The way this field has expanded makes it very difficult to take it seriously. It’s been reduced to a slogan used by scam artists to sell nonsense books, trading systems, newsletters and ‘mentoring’ based on quasi religious numerology and mysticism. Professionals stay clear of the term ...

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Why I prefer RightEdge for strategy modeling

Choosing a good platform for strategy modeling, simulations and signal generation is critical. The bleak reality is that most back testing software is horribly bad. They are geared towards consumers with limited knowledge and experience and they cater to what your average get-rich-quick technical analysis guru claims that you need. I’m often asked for my views on simulation platforms, and in ...

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How to build a professional simulation environment – On the cheap

Do you want to learn how to build a professional environment for trading simulations without paying an arm and a leg? Building a proper environment for developing and testing trading strategies can be very expensive. It doesn’t have to be though, as long as you’re willing to put in some work. I work with both cheap and expensive tools and ...

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