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The Oops! Pattern - In Sample / Out of Sample

Percentage manThe terms In Sample and Out of Sample refer to a technique for backtesting trading strategies where there is some kind of optimisation or data mining taking place, i.e. finding the ideal parameters to trade with. It's common to use two sets of data, however, I was always taught to use three. Here's how it works...

  1. Take a data set, let's use 2000 through 2015.
  2. Divide that set into three, so we'll use 2000-2005, 2005-2010 and 2010-2015
  3. Next, take the middle set 2005-2010, which is known as the In-Sample data, and do all testing, data mining and wanted optimisation on it.
  4. Then take the parameters and rules from that and apply it to the other two sets of data, which are both considered the Out of Sample data.

If the results appear consistent across the entire data series then you may be on to something.

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What Say You Santa?

santa thinkingTwice a year seasonal influences become the hot topic of conversation across social media; Sell in May and the Santa Claus rally.

Let's take a look at a few stats on the monthly ups and downs throughout the year and see where December fits in. For this simple test we buy on the first trading day of each month and exit on the first day of the next month. We use All Ordinaries data back to 1980 and S&P 500 data back to 1927.

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Trading Short Term In Australia

triumphant stock trader 300The strategy disclosed in our popular Earn A Second Income series was specifically designed to trade US equities, mainly because it offered a high level of trade frequency, which is an important element of profitability, and because US equities tend to have quite low commission rates.

The sign of a robust strategy is one that uses the same inputs to trade reasonably well across many instruments (we used the Russell 1000 constituents), but also one that can trade across different markets. And to that end one of the common questions we get is, "I'm interested in short term trading. Can I trade this strategy in Australia?" So let's put it to the test on the ASX.

The strategy outlined is a mean reversion technique that looks to buy stronger stocks that are taking a short term dip, and whilst it trades both long and short, we'll just use the long-only signals for this example. First, let's review the system rules:

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Is the ASX Open Over Christmas?

 

Christmas Ornament 200Christmas is a busy time of year and at The Chartist it is no different. We provide strategy updates right through the holidays except for the days the ASX is closed.

In 2017 the ASX trading calendar states that the ASX is closed on Christmas Day which is Monday 25th December and also closed on Boxing Day. Tuesday 26th December.

The ASX is closed on Monday 1st January 2018 whilst everyone rests their sore heads. Whilst the 2018 calendar hasn't been released at the time of writing, the first trading day for 2018 is most likely Tuesday 2nd January 2018.

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Pump 'n Dump Strategy

Pump n dump

It seems everyone has a little interest in Pump ‘n Dump trading this week. A Pump ‘n Dump is normally associated with the illegal ramping of a micro cap stock (known as penny stocks) and then selling once the stock price has risen following the surge in interest as a result of the ramp. 

One of the best known penny stock advocates is Timothy Sykes who actually attempts to short the stock that are being ramped in order to profit when they come plunging back to earth.

It seems some of his members had an interesting week with the strategy trading a little known US stock called KaloBios ($KBIO). Last week $KBIO traded from $1.90 to over $45 in a matter of days.

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