Overnight gapping action on the E-Mini has shifted from being the exception to being the norm. And not just that, what’s even more interesting is that opening gaps in the majority of the cases preceded the direction of the ensuing trading session. In other words, a gap higher at the opening bell has a high probability of not being closed but followed up in the following hours and the same applies to an opening gap lower.
It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.
Earlier today the GoldGerb asked me how to put together a scatter plot for raw edge discovery as introduced to you by Scott during my Tenerife adventure. Since my gums and I are feeling a bit better than anticipated I thought I may as well condense some of the exchanges I’ve had with him into a dedicated post. It is my belief that raw edge discovery (or RED as it shall be known henceforth) is an integral but much neglected aspect of system development.
I keep getting distracted, but I’d like to move ahead quite rapidly now since Mole will be back on deck soon enough. Today’s post has enough information for you to go ahead and build working mean reversion trading systems right now, with not that much work involved.
I think we’ve covered in enough detail the idea that the best systems are based around a simple and clearly articulated idea, which can be tested for veracity.
The problem with complicated ideas is that our brains are built to believe all kinds of bullshit that isn’t true. Look at the recent election for a perfect example, we are a walking stew of cognitive biases that fuck with us [...]