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Nearest neighbour classification
I've been following trading the odds blog for some time now. It surprised me how well Frank was able to predict the short-term movement of the S&P500. At first I was quite sceptical about the...
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Closing the gap strategy
Fading the opening gap is a well-known strategy, promising acceptable results with minimal efforts. A great article about trading gaps is written by Scott Andrews. It sounded interesting, so I've...
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Closing the gap, part 2
I felt the need to verify the calculations in the previous post, just to be sure no coding error was made, or at least not a serious one. To do this, I've rewritten the strategy using vector operations...
View ArticleLooking for cooperation
Quite a time ago I've written a post about open innovation, the reason I've started this blog. Looking back, this 'loose cooperation' was very fruitful. During past year and a half this blog has...
View ArticleGaps, part 3
Recently I've come to realise that I've made quite a mistake calculating the 'fill' ratio for the gaps. It's time to correct it, before somebody will embarrass me in the comments ;-).The problem is...
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HOWTO: Signal filtering, the better way.
It is hard to find a trading system that does not employ signal filtering through use of sma, ema, wma and the likes. I'm not going to dive in detail on the inner workings of these filters as this info...
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When Sharpe is useless
During development of an intrady strategy I've come across a case where Sharpe ratio (and Sortino too) is a very bad way to benchmark performance. To illustrate this case, imagine a strategy that...
View ArticleIn trading no one should ever be absolutely sure
...and the one who is will get punished sooner or later. This has happened countless times, to traders of all skill levels. Once you think you've got a trade on your hands that can't possibly go wrong,...
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FAS vs FAZ - inverse etf behavior
There has been a lot of talk about leveraged etf (under) performance . In general, these etfs seem to underperform their benchmark. A google search for 'leveraged etf decay' will provide a couple of...
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The problem with shorting leveraged etfs
As I've described in my previous post, inverse etfs decay relative to each other. After looking at their charts it is not difficult to imagine earning 'easy mony' by shorting a pair of leveraged etfs....
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Guess what, leveraged etfs don't decay!
While writing the previous posts and doing the math I still had a feeling that something in my reasoning was not quite right. I could not put a finger on it, but with the help of the author of OnlyVix...
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Implied vs Realized volatility premium
There is a funny thing that I've come across while trying to build a volatility model. According to my estimations the VIX is usually higher than the actual volatility (RV) realized for that same...
View ArticleGoing Python
It was a tough decision to make, but I decided against using Matlab as an intraday trading platform. It is still the best data digging tool out there, but for application development it just doesn't...
View ArticleGoing Python II
The trading platform to be now has got a name: Nautilus. It is available on Google code.I have decided to share the project in an early stage. Because of this it may currently be of interest to a...
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Are we in for a rebound?
Today we've had a pretty heavy drop in the SPY, that has been preceded by a series of down days. It could be tempting to join the panicking crowd, but the crowd usually gets it wrong.The put/call ratio...
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XIV is stealing my money!
With current volatility exceeding 40, it seemed like a good idea to short the VIX. Two very popular ways to do this is either to short VXX or go long XIV. I choose to go long XIV a couple of days ago,...
View ArticleGetting started with Matlab & finance
I am thinking about creating a series of screencasts showing how to use Matlab for financial research. This is the first one, covering the basics and aimed at people not yet familiar with Matlab.The...
View ArticleWhy should I learn a programming language?
People are bad at math. Some are better than others, but who can calculate ln(sqrt(345)*34)^3.4 in less than 1/1000th of a second? Even the simplest computer can calculate at a rate million times...
View ArticleWhich programming language to choose?
When I started programming as a kid somewhere in the early nineties, choosing a programming language was easy, as there were not many to choose from.I first started in Pascal and since then have...
View ArticleAdd database functionality to Matlab with SQLite.
Matlab data structures are fine for most of research work, but running a daily trading business is a different thing. A trader or an account manager often needs to maintain a list of trades, accounts,...
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