Recent content by winnertakesall

Sharpe ratio of 2+ was easier before when interest was 2%. Now that interest rate is 5%, it would be much harder. Having said that, backtest result often don't translate into reality. Do a forward test.

How do you calculate Sharpe decay rate?

It's not so easy to cross the bid and ask spread. Once you know how, you can become a market maker. But not with Excel.

The simplest way to test entry is to exit at fixed time, for example enter at X and exit after 30-120 minutes. If the entry method has alpha, results will show. Happy Thanksgiving!

Nice, another Sharpe 2-3 system. How many variables are you optimizing?

How many variables do you need to optimize for sharpe ratio of 4? Are you then set for life or do these system have a short shelf life?

Is this speed on daily bar or minute data?

That was a just a hypothetical average return and standard deviation. But I do understand now why HFT typically has higher Sharpe ratio. Just the sheer number of trades (even with just a little bit alpha) can achieve smooth monthly earnings.

Can somebody confirm this? Let's say I have a hypothetical return of average 1% per month and that my monthly return standard deviation is also 1%. Then most of the monthly return is somewhere between 0 to 2%. The annualized Sharpe ratio would then be SQRT(12)*1/1 = 3.46. That's quite a high...

One way to think about edge is the cutting-edge of a knife. Will you choose to cut a steak with a dull knife with very little edge or will you choose a knife that has long sharp edge. Hopefully with trading, you will choose a method that actually helps you to carve out profit surgically.

If volatility ratio > 1.1 or some x, then enter on the side of the momentum. Simple really.

Yes, both trend following and mean reversion strategies got more difficult. Mean reversion would show slight positive return in backtest but not making enough to cover slippages. What changed is the nature of volatility itself.

This may be way over my league. When I explored trading strategy in 2015, I ran thousands of optimizations to narrow down to a few strategies (both trend following and mean reversion) that has worked 3 years running. I figure if it worked every year, then something must be right. Those...

My system happened to be shorting two contracts of crude oil last week. Over the weekend, I receive an email threatening to charge $0.59 per contract per day if I don't liquidate those positions in 4 days. The emails says that my worst exposure is $102,906, which in my case is for two...