Blog

Explore the research behind our trading, plus some just-for-fun stuff....

Posted on Oct 03, 2019 by Kris Longmore
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In the last two posts, we implemented a Kalman filter in R for calculating a dynamic hedge ratio, and presented a Zorro script for backtesting and trading price-based spreads using a static hedge ratio. The goal is to get the best of both worlds and use our dynamic hedge ratio within the Zorro script. Rather than implement the Kalman filter...

Posted on Sep 25, 2019 by Kris Longmore
1 Comment.
97 Views

In our previous post, we looked into implementing a Kalman filter in R for calculating the hedge ratio in a pairs trading strategy. You know, light reading... We saw that while R makes it easy to implement a relatively advanced algorithm like the Kalman filter, there are drawbacks to using it as a backtesting tool. Setting up anything more advanced...

Posted on Sep 19, 2019 by Kris Longmore
6 comments.
185 Views

Anyone who's tried pairs trading will tell you that real financial series don't exhibit truly stable, cointegrating relationships. If they did, pairs trading would be the easiest game in town. But the reality is that relationships are constantly evolving and changing. At some point, we're forced to make uncertain decisions about how best to capture those changes. One way to...

Posted on Sep 13, 2019 by Michael M
2 comments.
49 Views

Chart patterns have long been a favourite of the technical analysis community. Triangles, flags, pennants, cups, heads and shoulders.... Name a shape, someone somewhere is using it to predict market behaviour. But, is there a grain of truth or reliability in these patterns? Can it really give you a hint as to the future direction of the market? ah, I...

Posted on Sep 10, 2019 by Kris Longmore
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When tinkering with trading ideas, have you ever wondered whether a certain variable might be correlated with the success of the trade? For instance, maybe you wonder if your strategy tends to do better when volatility is high? In this case, you can get very binary feedback by, say, running backtests with and without a volatility filter. But this can...

Posted on Sep 05, 2019 by Michael M
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As traders, we like to get waaaay ahead of ourselves in the race to understand and exploit the financial markets. One symptom of our eagerness is often wrongly assuming that more complexity = more profit. This assumption can lead us down long and unnecessary rabbit holes and away from the more mundane fundamentals that account for 80% of our day-to-day...

Posted on Sep 03, 2019 by Michael M
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In part 1 of this series, we talked about how a market-savvy systematic trader would approach a period of drawdown in a trading strategy. Specifically, they'd: do the best job possible of designing and building their trading strategy to be robust to a range of future market conditions chill out and let the strategy do its thing, understanding that drawdowns...

Posted on Aug 28, 2019 by Michael M
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Imagine you’ve tinkered for days or even weeks, perfecting a strategy idea that’s showing a whole lot of promise. You’ve meticulously tweaked a mouth-watering Sharpe Ratio out of your backtests….it even survived costs. YES! Systems go, let’s trade it. Imagine this new strategy enters a drawdown.…maybe a lengthy one....maybe from day one! How would you react to such a letdown?...

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