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Article Archive For Perry J. Kaufman
DownloadWhich Is Better: The N-Day Breakout Or The Swing Breakout?
ARTICLE SYNOPSIS ...Here's a study that compares the classic method of using swing highs and lows for trading signals versus a modern approach of signals based on new highs and lows over a given number of days. Which will you choose...
Can A Stochastic Indicator Be A Trading System?
ARTICLE SYNOPSIS ...Are signals from the ever-popular stochastic oscillator reliable enough to be used in a trading system? This test might help you decide...
Trading A Breakout System
ARTICLE SYNOPSIS ...When trading a breakout system, does it improve results to get in either early or late? Here's a test to find out...
How Professionals Assign Risk
ARTICLE SYNOPSIS ...Risk versus return is the name of the game in trading. How does a fund manager set risk limits for a portfolio or fund that it manages? Here are some insights that could help you better manage your own portfolio...
The Delta-Delta Crude Strategy
ARTICLE SYNOPSIS ...Here is an interesting trading strategy you can consider for crude oil that is based on term structure patterns...
Trading Opening Gaps And Extreme Closes In Stocks
ARTICLE SYNOPSIS ...When large opening moves and large closing moves occur, what is the stock likely to do next...
Gap Momentum
ARTICLE SYNOPSIS ...Here's a way to use opening gap data to create a momentum strategy...
Crossover Trading: Arbitraging The Physical With The Stock
ARTICLE SYNOPSIS ...Arbitrage trading isn't limited to stock pairs or interest rate markets. You can also pair equities with futures.How do you find good candidates for an arbitrage trade? Here are several methods you can use to evaluate a potential pairing...
Overlooked Strategy Rules
ARTICLE SYNOPSIS ...If you're only using a trend and a stop-loss, you're missing out on a lot...
Pros And Cons Of Daily Versus Weekly Trend Following
ARTICLE SYNOPSIS ...Weekly data is smoother than daily data. So should we be using weekly data for trend-following signals? Here's a test to find out...
Theory Versus Reality
ARTICLE SYNOPSIS ...Are your expectations in line with reality? Here's a look at some traditional market beliefs and whether such scenarios tend to play out as expected...
Determining Risk Before It Happens
ARTICLE SYNOPSIS ...Assessing the risk of being in the markets is a topic that always looms large with investors. What are some ways to calculate and assess it, and what place should each method have in your work? Here's a look at the most important and commonly used measures of risk, and considerations for how you might use each...
How To Trade Merger Arb
ARTICLE SYNOPSIS ...Mergers and acquisitions present opportunities for speculation in the markets; institutional investors routinely pursue such opportunities. Can individual investors also profit from speculating on this type of corporate event? Here's a look...
Interview: A Conversation With Herb Friedman
ARTICLE SYNOPSIS ...Herb Friedman manages money using high-yield mutual funds, an investment area not often covered in this magazine. Friedman offers investment advice as an investment advisor representative of Portfolio Medics, an SEC-registered investment advisor. Quantitative analyst, trader, and book author Perry Kaufman interviewed him about his trading style, his areas of market expertise, and his investing philosophy of keeping it simple...
Can Volume Predict Price?
ARTICLE SYNOPSIS ...What does higher or lower volume today suggest about tomorrow's price? Here's a test to find out...
Protecting Your Wealth While Making A Profit
ARTICLE SYNOPSIS ...By allocating capital to the equity index markets in different regions of the world that are showing the strongest momentum, you can multiply your profits. Here is how you can ride the global momentum...
Matching The Markets To Your Trading Style
ARTICLE SYNOPSIS ...Traders can choose to use a trend-following method or a mean-reversion method depending on the market, but how can you tell when and where to apply each? Here's a way you can know...
Do Small Price Changes Matter Or Are They Just Noise?
ARTICLE SYNOPSIS ...Can trend trading be improved by filtering out small price moves to emphasize the trend? Here are two test cases to help find out...
A Strategy For Trading Seasonal And Non-Seasonal Markets
ARTICLE SYNOPSIS ...If you can see a seasonal or non-seasonal pattern, you may be able to profit from it. Here is an example of how to find and exploit patterns...
ChatGPT: Are We There Yet?
ARTICLE SYNOPSIS ...So, are the recently developed chatbot AI tools ready for the trading world? Follow along on this trader's quest to find out how ChatGPT might be used to support trading...
The Portfolio Risk Dilemma: Let It Run Or Rebalance?
ARTICLE SYNOPSIS ...When volatility becomes too high, how can you reduce portfolio exposure without sacrificing your winners? Here is a smart solution you can consider...
Repatriation
ARTICLE SYNOPSIS ...Traders are always looking for tradable patterns in the data. Here is a pattern used by currency traders that you may not have heard of and that could provide an edge...
What Is The Real Risk Of System Trading?
ARTICLE SYNOPSIS ...By knowing the risk of being in the market, you can hedge and control portfolio volatility better. Here is a rundown of the most popular ways to evaluate and measure risk, as well as the strengths and weaknesses of each. In the end, you'll find out what's important and how you can use a spreadsheet to assess risk...
In-Sample Test Data, Out-of-Sample Data--Does It Really Matter?
ARTICLE SYNOPSIS ...Backtesting a trading strategy or trading system before trading it has always been an important part of the system trader's process. But what's the best way to go about it? Here's an overview of the process and some finer points on how to select data to use in backtesting...
Is It Too Volatile To Trade?
ARTICLE SYNOPSIS ...Traders profit from volatility. But what exactly is the tipping point where volatility crosses over into excessive risk? Here are tools you can use to measure volatility and determine that crucial point...
Trading A Moving Average System: Important Choices
ARTICLE SYNOPSIS ...Most traders have used moving average-based trading systems to derive trading signals. But how you define the signal can greatly affect the outcome. Here's a study to help determine the best ways to apply a moving average system...
50 Years On, What Have I Learned?
ARTICLE SYNOPSIS ...Here, we offer up a collection of 20 market observations and market wisdoms from someone with more than 50 years of experience in trading, studying, and analyzing the financial markets...
Capturing Opportunity By Fading The News
ARTICLE SYNOPSIS ...Is there an opportunity to sell a rally following a stock upgrade or other bullish news on a company? Here's a test to find out...
Better Entries
ARTICLE SYNOPSIS ...Does waiting for a pullback when entering a trade improve results, or does that just cause you to miss out on the trade? What about other popular entry methods? Here's a test to find out what may work best...
Avoiding The Pitfalls Of Historical Data
ARTICLE SYNOPSIS ...Testing a trading strategy depends on handling the data correctly. How do price shocks figure into the historical data...
A Fresh Look At Short-Term Patterns
ARTICLE SYNOPSIS ...You may be familiar with some of the most popular short-term patterns, but do you know which work best? These test results may help you find out...
Playing It Safe With Cryptos
ARTICLE SYNOPSIS ...Cryptocurrency trading carries various kinds of risks. Here, we'll compare several trading methods to find out which could have less risk when approaching the cryptocurrency markets...
Fools Rush In: Investing In IPOs
ARTICLE SYNOPSIS ...Many people rue the day that they passed up an opportunity to buy an IPO that went on to make investors millions. How often do IPOs pay off? And when they do, how long does it take? We'll take a look at what some of the data says...
Comparing Two Adaptive Trends
ARTICLE SYNOPSIS ...Walk-forward testing and Kaufman's adaptive moving average try to do the same thing, but in very different ways...
The 1st And 2nd Cross
ARTICLE SYNOPSIS ...Traders know it is not possible to perfectly capture a full trend from its exact beginning to exact end. Here's a way you can capture a small but profitable portion of it, and with low drawdowns...
Price Shocks: Anticipation Is Everything
ARTICLE SYNOPSIS ...A major selloff in the market can happen suddenly or build slowly. When the market is dropping, how can the trader decide when it's time to move from risk-on to risk-off? Here's a method you can use based on volatility of returns and a few simple rules...
Essential Math For Traders
ARTICLE SYNOPSIS ...Do you understand the right way to calculate risk, reward, and the chance of something unexpected happening in the market? Are you sure? Just in case, here is a review of the basic calculations and concepts that every trader should know...
A Simple Way To Trade Seasonality
ARTICLE SYNOPSIS ...You can locate patterns to perform seasonal trades--although they won't necessarily be where you expect. Here's a way to uncover consistent patterns you can use to trade, not just on futures but also on some seasonal stocks...
Running For Cover
ARTICLE SYNOPSIS ...After stocks take a dive, many investors flee into bonds. Does that pay off, or is it already too late by then? Let's find out...
Volatility: What They Don't Teach You In Grad School
ARTICLE SYNOPSIS ...You're most likely not going to engage in a conversation about "lognormal volatility" at a cocktail party. But you may have come across the term in financial texts. This may or may not surprise you: When it comes to the stock market, what you read may not be completely accurate. Here's something that may turn out to be important to y...
In Search Of The Best Trend
ARTICLE SYNOPSIS ...There are so many ways to measure trends that it becomes difficult to identify which one to use. Here we compare five systems that each use a different method of determining trend, and we analyze the results to see which ones top the list...
Profit-Taking And Resets Part 1: Trend-Following
ARTICLE SYNOPSIS ...In this first part of a two-part series, we look at long-term trends and different ways to take profits and reenter trades...
Profit-Taking And Resets Part 2: Short-Term Trading
ARTICLE SYNOPSIS ...Trends can be useful for longer-term trades but what about short-term trades? Do they work just as well? Here's a look at a trading system that can be applied successfully to shorter-term trends...
Optimization - Getting It Right
ARTICLE SYNOPSIS ...Creating a trading system is hard work and we want our system to work well. Oftentimes, we get carried away by trying to tweak it so it works the way we want it to. But that can lead to unrealistic results. Here's one way to set realistic expectations when optimizing trading systems...
VIX Or Historical Volatility?
ARTICLE SYNOPSIS ...Position sizing is an often overlooked variable when it comes to strategizing your trades. There are different ways to decide how big your positions should be and here we look at a unique approach to size your positions using volatility...
The Return Of High Momentum
ARTICLE SYNOPSIS ...There's no right or wrong way to look at the market. The reality is that with so many choices, you can get creative with your analysis techniques. Here's a look at how to combine two related indexes and use opposite strategies for each...
Timing The Market With Pairs Logic
ARTICLE SYNOPSIS ...Fundamentally different strategies, drawing from a broad set of markets, will offer better risk protection during times of market stress than any one strategy, regardless of the markets selected for the portfolio. In this article, you will get an overview of a timing method that you can implement in your trading, followed by the mechanics of that system....
Slope Divergence: Capitalizing On Uncertainty
ARTICLE SYNOPSIS ...It's a classic chart pattern and many traders use it, yet divergence patterns that could generate profits are easy to miss. Here's one way to automate identifying profit-making divergence patterns....
On Profit-Taking by Perry J. Kaufman
ARTICLE SYNOPSIS ...On Profit-Taking by Perry J. Kaufman Taking a profit should be so easy, but it never seems to be. Why is that? Veteran market analyst Perry Kaufman explains the whys and hows and also explains how profit-taking has advantages over straight trend-following. If you were to ask a trend-follower, "How do you trade successfully?" the answer would be, "Let your profits run and cut your losses short." That seems to be the philosophy underlying trend-following programs. One of the most stunning examples is gold, which in January 1980 skyrocketed from $100 an ounce to $850 an ounce. During the period...
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