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Moving averages are generally inferior as indicators because of lag. The technical term for lag is group delay because MAs are just lowpass filters. Look at the work of John Ehlers for some of his low lag and near-zero lag MAs.

Barbell strategy. Take no risk and extreme risk at the same time. One way to implement that would be to buy T-bills and use the interest income to buy far OTM puts.

My definition is a price action that has been proven to be correct in it's directional call >= 65% of the time when backtested in >200 simulated trades. For me, correctness is the lynchpin of profitability, and that has to be scientifically proven. Why? Because repeatability is the very...

It's quite simple why people don't want to believe in Christianity, or any religion for that matter. It is because religion would crimp the lifestyle they are used to.

If you could predict direction correctly, even something like 65% of the time, you could rule the world eventually because of all the money you would make.

Correlation is the wrong measurement for relationships between assets, because their times series are not stationary. Cointegration is the measure to use. Two time series are said to be cointegrated if they move together over time, and the distance between them is stable. Simply, two...

So random entries plus risk management yield positive expectancy and thus profit? That's hard for me to believe. Making money in the markets is predicated on being right about something. Risk management helps mitigate the times when we are not right. being right + risk management = profitability

I think Xela has the best explanation of what prediction means in regard to financial indicators. John Ehlers has an indictor that he labels as predictive, and there is a method from digital signals processing called linear prediction, which extrapolates data into the future. However, I have...

Because trading with the short term momentum and big money that runs stops placed at obvious support/resistance is a legitimate strategy.

I would recommend that you look at maximizing payoff instead of just probability of win. payoff = probability of win * (reward/risk)

So how does a nation go about ending this death spiral? Me thinks going back to a gold/silver/platinum standard (even if that means gold at $10,000/ounce), do away with a central bank, and do away with fractional reserve banking, to be replaced by fee banking.

First off, I trade mean reversion strategies, not trends. As pointed out by Visaria, price has a non-stationary distribution, but the first or second derivative of price usually is stationary. Therefore any kind of linear assumption about price and trend calculation based on that assumption is...

I've always thought this was a great tune, but the problem is how does Ed define a trend mathematically? It must be defined mathematically so that it can be back-tested and proven scientifically that it is a positive expectancy system. Also, it needs to be able to be coded into an algorithm so...

Does Elliott Wave Theory actually work? There is no way to verify that it does or doesn't because the theory is not based on any kind of rigorous scientific or engineering principals. No mathematical rigor is ever presented. It's just predicated on an observation that market prices look...

Some say he is fictional (not me of course), but God is my choice for HF manger. He knows what the closing price will be tomorrow and every day.

In Canada of course. Specifically, the Klondike. Don't you watch Gold Rush?

No, I only have $50 in the bank, and an IOU for $50 more. The only way I get my full $100 back is if the borrower is not a dead beat and pays the full amount of the loan to the bank. Sound familiar? Of course there could be a fourth person in our economy whose purpose is to print pieces of...

Is Walk-Forward (out of sample) testing simply an illusion? If price movements evolve as a random walk, then yes, it is an illusion. It seems the best models of market price movement suggest random walk is the best fit. However all models are wrong to one level of precision or another. How...

Here is some Excel formulas to help you: stdev = (ln(future_price/current_price))/(volatility*sqrt(days_til_expiry/252)) probability = normsdist(stdev) The one uncertain value is volatility. How good you are at predicting volatility can make or break the trade. Also, this is the probability...

Implied volatility cannot be solved from price directly by using a pricing model. There are several algorithmic ways of coming up with IV from a known price. A couple of them are the Newton-Rapson method and method of bisection. Here is a bit of C code that uses Black-Scholes and bisection to...