The Sharpe Ratio was developed by Nobel Prize William Sharpe of Stanford University. It measures numerically the historical Profitability/Volatility (standard deviation) ratio of an Investment Fund. It is calculated by dividing the yield of a fund minus the risk-free interest rate between the volatility or standard deviation of that return over the same period. Sharpe Ratio = Fund performance – Risk-free interest rate … Read more
Mean Reversion Strategies aim to generate profit when prices return to the mean after deviating from it. A typical example is buying when a stock’s price drops significantly, anticipating a price recovery. What is a Mean Reversion Trading Strategy? Mean reversion is a fundamental concept in trading strategies and finance that is based on the observation that, in many cases, … Read more
Next, we will present a simple technical analysis trading system based on signals from three well-known technical indicators: the stochastic oscillator, the Awesome oscillator, and the exponential moving average (EMA). As such, it is a technical system with clear rules that do not require extensive interpretation. Essentially, it is a trend-following strategy that opens positions in the direction of the … Read more
Algorithmic trading is a form of trading in which you use an algorithm, based on a set of predefined parameters, to open or close positions on your behalf. Algorithmic trading aims to eliminate the human factor (psychotrading) and instead follows predetermined strategies based on statistics that can be executed while the market is open, using an algorithm with minimal supervision. … Read more
Introduced by Van Tharp in 2008 in his book The Definitive Guide to Position Sizing, the System Quality Number, abbreviated as SQN, is an indicator designed to evaluate or measure the performance of a trading system or strategy. Subsequently, some variants and uses of the original formula have emerged that I consider very interesting; in particular to obtain sets of … Read more
The win rate is a popular performance indicator used in Forex trading to measure the success of a trading system or strategy. The win rate is the percentage of winning trades compared to the total number of trades executed over a specified period. A high win rate is often considered an essential factor for profitable trading, but there are other … Read more
What is the recovery factor? The recovery factor is an important indicator of the health of a trading system, which is calculated as the ratio of absolute profit to maximum drawdown. The recovery factor is usually measured in points or percentages. This indicator gives the trader an idea of the extent to which the total profit of the strategy exceeds … Read more
The trading strategy that we are going to present below was initially created to trade the S&P 500 index, but it can also be applied in other markets such as Forex, since it is based on price action and technical trading signals. In this section, we present a trading technique developed and used to trade the S&P 500 stock index, … Read more
This is a simple trading system that looks for overbought and oversold conditions in the price to enter the market, so it works best in non-trending markets, but still offers the ability to build an equity curve that grows positively and constant. It is based on the use of two-oscillator indicators, the RSI and the Chande oscillator, which are quite … Read more
In this article, we are going to introduce a scalping trading system designed for trading spot Forex and precious metals which can be quite profitable if the trader follows the rules carefully. This system is based on custom technical indicators for Metatrader 4, so unfortunately it can only be used on this trading platform. Firstly, it uses a trend indicator … Read more