Blog Archives

Have price jumps systematically followed analyst announcements?

Suzanne S. Lee (2012), from the Georgia Institute of Technology, investigated the predictability of intraday jump arrivals in U.S. stock markets. Using high frequency data from 1993 through 2008, for Dow Jones Industrial Average component stocks, she demonstrated that jumps have

Posted in Book One: Forty Trading Strategies Based On Scientific Findings About Analysts' Forecasts Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , , ,

Does one price jump lead to another in the same direction?

Friesen, Weller, and Dunham (2009), from the University of Nebraska, the University of Iowa, and Creighton University, Omaha, Nebraska, theorized that confirmation bias (i.e., the human tendency to give added weight to information that confirms one’s own beliefs) was the

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , ,

Do investors exhibit cyclic patterns of behavior?

Kamstra, Kramer and Levi (2003) – from the Federal Reserve Bank of Atlanta, the University of Toronto, Canada, and the University of British Columbia, Canada – examined returns from several large stock exchanges around the world at varying latitudes and

Posted in Book One: Forty Trading Strategies Based On Scientific Findings About Analysts' Forecasts Tagged with: , , , , , , , , , , , , , , , , , , , , , , , ,

Are exponential moving averages superior to simple moving averages?

Camillo Lento (2010), of Lakehead University, Thunder Bay, Ontario, Canada, examined dual moving average crossover systems, comparing simple with exponential moving averages. The analysis was conducted on the exchange traded funds for the S&P 500 (SPY), NASDAQ (QQQ), and Dow

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , ,

Do momentum and trend-following strategies work in futures markets?

Shen, Szakmary, and Sharma (2007) – from Alabama A&M University, the University of Richmond in Virginia, and the University of Southern Illinois in Carbondale – conducted basic momentum tests on commodity futures at the end of each calendar month, for

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , , ,

Does momentum-trading work with monthly charts, part 1

Molchanov and Stork (2010), from Massey University in New Zealand, examined monthly returns, from 1992 through 2007, of 220 of the world’s largest and most liquid stocks. The stocks came from five regions: United States (Dow Jones Industrial Average, 30

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , , ,

Do momentum strategies work with currencies?

Menkhoff, Sarno, Schmeling, and Schrimpf (2012) – of Leibnitz University, Hanover, Germany, Singapore Management University, and the Bank for International Settlements in Basel, Switzerland – examined forex data from January 1976 to January 2010 in 48 different countries. They found

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , ,

Do chart pattern recognition algorithms yield profits?

Leigh, Modani, Purvis and Roberts (2002) – from the University of Central Florida, Clemson University, South Carolina, and the University of Kansas – implemented a recognition algorithm for two versions of the “bull flag” technical charting pattern – signaling a

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , ,

Technical analysis: Introduction to Book Two

Technical analysis (TA) is based on the startlingly simple idea that all relevant fundamental information about a tradable security is incorporated into the price. Therefore, all technical trading strategies are based on variations of price and volume. Technical analysis includes

Posted in Book Two: Twenty-Four Trading Strategies Based on Scientific Findings About Technical Analysis Tagged with: , , , , , , , , , , , , , , , , , , , , , , ,

How have analysts found an information edge?

Green, Jame, Markov, and Subasi (2012) – from Emory University, Atlanta, Georgia, the University of New South Wales, Australia, the University of Texas, Dallas, and the University of Missouri – studied the effects of broker-hosted investor conferences on the informativeness

Posted in Book One: Forty Trading Strategies Based On Scientific Findings About Analysts' Forecasts Tagged with: , , , , , , , , , , , , , , , , , , , , , , , ,

Book Three: Trading With The News

Learn about a news-based trading system that yielded a back-tested, average annualized, compounded return from 2000 to 2011 of 58.6%.

“Only once you’ve done your homework will you be able to understand how the stock market works and learn to distinguish between news and noise.” Maria Bartiromo, Use The News

Book Two: Technical Analysis

Learn about the "trend recalling" algorithm that yielded researchers a simulated annual return of greater than 400% in multiple tests.

“The scientific method is the only rational way to extract useful knowledge from market data and the only rational approach for determining which technical analysis methods have predictive power.”
David Aronson, Evidence Based Technical Analysis

Book One: Analysts’ Forecasts

Learn the strategy, based on analysts' revised forecasts, that yielded researchers an average of 1.13% - 2.19% profit per trade, for trades lasting one to two days?

Learn how certain analysts' recommendations, following brokerage hosted investment conferences, yielded profits of over 3% during a two-day holding period?

Learn how researchers found an average profitability of 1.78% for two-hour trades following an earnings announcement?

"This set of tools can help both ordinary and professional investors alike to re-think and re-vitalize their stock picking, timing and methods. A young, aspiring Warren Buffet could put this book to good use."
James P. Driscoll, PhD, investor

Statistically Sound Machine Learning for Algorithmic Trading of Financial Instruments by David Aronson (software included)

Evidence-Based Technical Analysis by David Aronson

Archive of Earlier Posts