articles
Automating Intraday Strategies: From Manual Complexity to Algorithmic Precision
Intraday trading strategies have gained significant recognition for their ability to capture short-term market inefficiencies and extract uncorrelated returns. From time-tested opening-range breakouts (ORB) to volatility-based approaches, these strategies can deliver strong results when executed correctly. However, the speed, precision, and scale required to implement them effectively are nearly impossible to achieve manually. This underscores […]
Position Sizing in Trend-Following: Comparing Volatility Targeting, Volatility Parity, and Pyramiding
Introduction Trend-following strategies are widely regarded for their long-term returns and diversification benefits. Yet, much of the literature often highlights entry and exit signals, leaving position sizing relatively underexplored. How positions are sized and managed can profoundly affect the shape and stability of a strategy’s equity curve, influencing not only total returns but also drawdowns, […]
When Stock Volatility Becomes a Performance Drag
Traditional financial theory asserts that higher risk should be accompanied by higher expected returns, with risk commonly measured by the volatility of an asset’s daily log returns. This principle suggests that investors who endure greater uncertainty should be rewarded with superior performance over the long run. However, empirical evidence challenges this notion. Over the past […]
The Illusion of Exceptional Performance: How Randomness Can Create “Market Wizards”
In the world of investing, stories of traders achieving extraordinary returns often make headlines. These “market wizards” are celebrated, inspiring many to emulate their strategies. But how much of their success is due to skill, and how much is simply luck? While it’s challenging to answer this question definitively, we conducted an experiment to help […]
Breaking the Myth: Retail Investors Can Trade Like the Pros
In the world of finance, a long-standing belief persists: trading is a game best left to large institutional investors. This myth suggests that retail investors lack the resources, technology, and market influence to compete effectively. However, recent developments challenge this notion, revealing that retail traders are not only capable but may sometimes be better positioned […]
Exclusive Interview with Carlo Zarattini: Combining Quantitative and Discretionary Trading
Introduction: Carlo Zarattini is actually a trained mathematician. However, his family history suggests that the markets were already in his blood. After completing his math studies in Padua, the native Italian earned a Master’s degree in Quantitative Finance from USI Università della Svizzera italiana and Imperial College Business School in London. He also worked as […]
Conditional Profitability of Intraday Shorts
Shorting US equity markets has always been a challenge for active traders due to the positive long-term drift, commonly referred to as the equity risk premium. One common method to avoid the headwind from this long-term market drift is either to completely bypass the short side of a trading signal or to add a market […]
How to Evaluate the Effectiveness of a Trading Strategy: p-Values and Bootstrapping Methods
One common question we often receive from our readers is: “How do you evaluate the effectiveness of a trading strategy?” In this post, we’ll explore two fundamental techniques used in quantitative research to assess whether a trading strategy may genuinely offer an advantage or if its performance is likely due to random chance. These techniques […]