In my last post we contrasted the effects of data integrity and sample size on the backtested performance of mean reversion and trend following models. In today’s post we’ll explore which markets are most suited to each approach, but before we do that, let’s quickly take a look at why …
Tag: Mean Reversion
Few propositions in economics are held with more fervour than the view that financial markets are “efficient”, or that future price changes are unpredictable. Another strongly held view is the random walk hypothesis, which state that stock prices evolve according to a random walk and thus cannot be predicted. If …
In this post I’ll review a simple strategy that I developed many years ago that attempts to exploit reversion to the mean. I’ve named the strategy Jaws due to the Jaw like pattern that the indicators exhibit before an entry condition occurs. The rules: Buy on the close when the …