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Menampilkan postingan dari Desember, 2008

Applying Corrective AI to Daily Seasonal Forex Trading

  By Sergei Belov, Ernest Chan, Nahid Jetha, and Akshay Nautiyal     ABSTRACT We applied Corrective AI (Chan, 2022) to a trading model that takes advantage of the intraday seasonality of forex returns. Breedon and Ranaldo (2012)   observed that foreign currencies depreciate vs. the US dollar during their local working hours and appreciate during the local working hours of the US dollar. We first backtested the results of Breedon and Ranaldo on recent EURUSD data from September 2021 to January 2023 and then applied Corrective AI to this trading strategy to achieve a significant increase in performance. Breedon and Ranaldo (2012) described a trading strategy that shorted EURUSD during European working hours (3 AM ET to 9 AM ET, where ET denotes the local time in New York, accounting for daylight savings) and bought EURUSD during US working hours (11 AM ET to 3 PM ET). The rationale is that large-scale institutional buying of the US dollar takes place during European working hours to pa

The enduring profitability of mean-reversion strategies

Some readers have doubts about my assertion that mean-reversal models continue to be very profitable during this whole year of financial and economic disasters. So I backtested the mean-reversion strategy in Example 3.8 of my book with the most recent one-year SP1500 data. Without transaction cost, the Sharpe ratio is 4.8. Even after subtracting 10 b.p. round-trip transaction cost, it is still at 3.5. Since the strategy was constructed over a year ago while I was writing the book, this most recent backtest is done on unseen data, with absolutely no look-ahead bias!

Josh Brolin on day trading

Actor Josh Brolin ("Milk", "W", "No Country for Old Man") said on Charlie Rose that his trading portfolio had a 57% return this year. His strategy is based on entering on reversal from a trend. Sounds pretty reasonable to me: maybe some of our readers can backtest this. Below is the full interview, beginning with Sean Penn, then goes on to Gus Van Sant, then finally Josh Brolin mentioned his day-trading at the very end of the 1 hour show. Interested? He is starting a multi-million dollar hedge fund to manage your money.