This is a summary of links featured on Quantocracy on Wednesday, 03/16/2016. To see our most recent links, visit the Quant Mashup. Read on readers!
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Corey’s Take: Building a Portfolio for ReSolve s March Madness Challenge [Flirting with Models]The team over at ReSolve recently posted about their very unique March Madness Challenge. The crux of their idea is that the rules governing a more traditional bracket system is fundamentally flawed since it inherently reduces the sample size upon which skill is measured. For example, nearly everyone in the bracket will choose the #1 seed to beat the #16 seed in each region, eliminating the
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Never Book a Loss (And Why That s Bad For You) [Throwing Good Money]I have got a great trading system for you. I mean, look at that equity curve! Its very straight, no drawdowns, and $30,000, compounded, became almost $120,000 over time. Whats the catch? They say (and Im not sure who they are) that the average retail investor hates to book a loss, and takes profits too soon. The reverse of the cut your losses early and let your profits run
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Adding Stops and Scaling Out to a Mean Reversion Strategy [Alvarez Quant Trading]I came on an idea recently that I had tested. I have tested adding max loss stops to a mean reversion strategy, with no success. See this post for more on that. About eight years ago, I tested scaling out of trades. But this person claimed that adding the two together was how to improve a mean reversion strategy. Interesting idea I had not tested. I have a one question poll below about what to do
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The Seven Deadly Sins of Quantitative Data Analysts [Quandl]Sooner or later, every quant is tempted by forbidden fruit. These all-too-human traits can permeate even the most sophisticated analysis. Keep these tips in mind as you develop strategies, and you just may turn vice into virtue. Quandl_7_sins_v04 (1) Download the printable version here.
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Price Breakout with NR7 | Trading Strategy (Filter & Exit) [Oxford Capital]I. Trading Strategy Developer: Toby Crabel (Setup: NR7 Pattern); Laurence A. Connors, Linda B. Raschke (Entry: Price Breakout with NR7). Source: (i) Crabel, T. (1990). Day Trading with Short Term Price Patterns and Opening Range Breakout. Greenville: Traders Press, Inc; (ii) Laurence A. Connors, Linda B. Raschke (1995). Street Smarts | High Probability Short Term Trading Strategies. M. Gordon
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Testing The Beta Premise [Larry Swedroe]One of the most important issues in finance concerns the relationship between risk and expected return. John Lintner, William Sharpe and Jack Treynor are generally given most of the credit for introducing the first formal asset pricing model, the capital asset pricing model (CAPM), which was developed in the early 1960s. The CAPM provided the first precise definition of risk and how it drives
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Limits of Machine Learning Part 2 [MKTSTK]Last weeks podcast was pretty negative on the value of machine learning in trading, so this week I wanted to provide my own counterpoint and explore life within the limits I identified earlier. Specifically, I wanted to begin mapping the things machine learning algorithms might really be great at doing in the world of trading and finance. This podcast is presented in a slightly different manner