Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
Hi Larocag, you are correct, the process of evaluating trading or investment ideas is a significant issue. However I did want to clarify that nothing I do is an academic exercise. It is natural and expected that different people will view the market differently and draw different conclusions. Thanks for commenting.
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
Hi Roger, I would suggest caution with regards to using a similar rule set to sell short. I have found that at least for stock indexes, it is much more difficult to develop short-selling models that work in both testing an real time trading. Thanks for commenting.
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
It is definitely true that what you switch into when signal goes to cash makes a big difference. So does using actual monthly historical rates vs. making an estimate of an average rate over the time period. Thanks for commenting.
You Can Profit From Other Investors' Mistakes: Price Action Research In The SPY [View article]
You are correct. Nothing presented in this article was a complete trading strategy, partly for the very reasons you mentioned.
What we are doing is documenting market tendencies - which can then be refined into workable trading systems/approaches on their own, or used as a guide for establishing longer term investments at a point where there is a short term advantage rather than a disadvantage (what the majority do).
A good trading strategy needs to have an average profit large enough to cover execution issues/costs by a healthy margin. I have found that strategies that hold multiple days are not quite as sensitive to getting an "exact" price as one would expect. There is nothing particularly special about the exact closing price that makes it necessarily better than scaling into the trade at some point before the market closes.
One final note which I also needed to clarify in my last article too: Looking at the forward one day expected return does not suggest we are looking at a day trading ideas. For example, If the signal is present 3 days in a row that would imply a three day hold, not buying and selling each day on the close. This is significant because (for example) in the above studies, the average profit per trade event would be considerably higher than the average profit-per-day in the trade. If that made sense.
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
A reverse split will not change the economics of the situation, but it should aid the ETF in continuing to be a popular trading vehicle. As to your other questions, I try to position for what the odds favor rather than make a specific predictions. All kinds of things could make the VXX ETF go up. If you examine a long term chart you will see that there have been times where it would have been brutal to be short. Best wishes.
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Rick, thank you for sharing your methodology. You raise some interesting questions. I agree with you to a certain extent - when judging The MA cross results in isolation. The MA cross results were presented as a study to be viewed in the context of other information presented - not as a trading system.
VIX Futures started trading in March of 2004, so there is a limited data set to work with when conducting studies that look at intermediate-term holding periods.
-Using the 2004-2007 Data rather than 2007-2012 does not materially change the results. -Every single moving average combination between 5 and 20 (short ma) and 20 - 60 (long ma) Yielded a significant average profit (evaluating 496 combinations) between March 2004 to present. -Every single combination between 20 - 60 (short ma) and 60 - 120 (long ma) also yielded a significant average profit (evaluating 2500 combinations).
Even with a limited 8 year data set, I think most people who are familiar with testing MA trend systems would find the above results to be a highly irregular.
Yet, even here what is considered “unusual” or significant is a matter of perspective. This market got my (and other) traders attention precisely because it appeared to display a clear visual pattern and often trades with very steep contango. In fact, it is the erosion of the steep contango that has created much of the favorable MA cross results. From this perspective, the results are not the least bit surprising - in fact they are expected.
Generally, I embrace the fact that different participants will have different analytical and investment approaches. Specifically, in my personal trading I am entirely willing (in fact eager) to jump on situations where there is an incomplete information set and I can manage risk and evaluate feedback in real time.
Warren Buffett On Profiting In An Inflationary Environment [View article]
I can't speak for Grantham or Buffett of course, however Buffet has said his view on intangible assets is one of the places his viewpoint ended up diverging from his mentor Benjamin Graham.
I would think one approach to assessing basic material or "tangible asset" stocks (Using the framework Buffet uses here) would be to evaluate the type and size of capital outlays that will be required in the future.
If the stock will be required to make large capital outlays to maintain sales, it is possible these outlays will eat up much of the future return in an inflationary environment.
For example: Lets say you found a company that owned 300 years of raw materials and leased the land by competitive bid to third parties. This company might benefit from inflation more than a company that routinely maintained and purchased expensive equipment and owned only a very small asset base (Meaning it will be required to purchase or lease mining rights/land under inflationary conditions in order to maintain operations).
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Looking at a one day forward return does not necessarily suggest day a day trading approach. All else equal, if the one day forward return is favorable, it suggests maintaining a position, not exiting on the close. For example if the one day forward return is negative 15 days in a row (by whatever analytical method you are using), that suggests maintaining the short position for 15 days ,etc.
You Can Profit From Other Investors' Mistakes: Price Action Research In The SPY [View article]
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
Extremely Simple Trend-Following Trading Models Have Dominated Buy-And-Hold [View article]
You Can Profit From Other Investors' Mistakes: Price Action Research In The SPY [View article]
What we are doing is documenting market tendencies - which can then be refined into workable trading systems/approaches on their own, or used as a guide for establishing longer term investments at a point where there is a short term advantage rather than a disadvantage (what the majority do).
A good trading strategy needs to have an average profit large enough to cover execution issues/costs by a healthy margin. I have found that strategies that hold multiple days are not quite as sensitive to getting an "exact" price as one would expect. There is nothing particularly special about the exact closing price that makes it necessarily better than scaling into the trade at some point before the market closes.
One final note which I also needed to clarify in my last article too: Looking at the forward one day expected return does not suggest we are looking at a day trading ideas. For example, If the signal is present 3 days in a row that would imply a three day hold, not buying and selling each day on the close. This is significant because (for example) in the above studies, the average profit per trade event would be considerably higher than the average profit-per-day in the trade. If that made sense.
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
VIX Futures started trading in March of 2004, so there is a limited data set to work with when conducting studies that look at intermediate-term holding periods.
-Using the 2004-2007 Data rather than 2007-2012 does not materially change the results.
-Every single moving average combination between 5 and 20 (short ma) and 20 - 60 (long ma) Yielded a significant average profit (evaluating 496 combinations) between March 2004 to present.
-Every single combination between 20 - 60 (short ma) and 60 - 120 (long ma) also yielded a significant average profit (evaluating 2500 combinations).
Even with a limited 8 year data set, I think most people who are familiar with testing MA trend systems would find the above results to be a highly irregular.
Yet, even here what is considered “unusual” or significant is a matter of perspective. This market got my (and other) traders attention precisely because it appeared to display a clear visual pattern and often trades with very steep contango. In fact, it is the erosion of the steep contango that has created much of the favorable MA cross results. From this perspective, the results are not the least bit surprising - in fact they are expected.
Generally, I embrace the fact that different participants will have different analytical and investment approaches. Specifically, in my personal trading I am entirely willing (in fact eager) to jump on situations where there is an incomplete information set and I can manage risk and evaluate feedback in real time.
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Warren Buffett On Profiting In An Inflationary Environment [View article]
I would think one approach to assessing basic material or "tangible asset" stocks (Using the framework Buffet uses here) would be to evaluate the type and size of capital outlays that will be required in the future.
If the stock will be required to make large capital outlays to maintain sales, it is possible these outlays will eat up much of the future return in an inflationary environment.
For example: Lets say you found a company that owned 300 years of raw materials and leased the land by competitive bid to third parties. This company might benefit from inflation more than a company that routinely maintained and purchased expensive equipment and owned only a very small asset base (Meaning it will be required to purchase or lease mining rights/land under inflationary conditions in order to maintain operations).
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]
Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects [View article]