Short Term Trading Strategy

The essence of our ST model is a forecast the trend of the market one day ahead. The forecast is based on the detection of the repetitive patterns that is possible with our proprietary transformation of the price data into a specially chosen configuration space. An informed investor would only buy a stock if there were a good reason to believe that he can sell it at a higher price later. There are two uncertainties that an investor faces: price and time. An investor may be lucky and some day find the prices higher than they were when he bought the stock, but an emotion and hope of even higher prices interferes with his decision to sell the stock. The analysis of price change correlations shows that price action that occured remotely in the past is not related to the price action at present with a rare exception of extreme price action, such as we have seen after September 11 of 2001. In other words most of the time market has just a short term memory. The origin of the repetitive patterns could be explained by predictable behaviour of the majority of the market players such as small speculators or program traders.

High smoothness of the Equity Curves for both QQQ and SPY indicates a high Sharpe Ratio. When deciding how much money to invest into higher return (and higher risk) financial securities, money managers take into consideration the Sharpe Ratio. The higher the ratio, the larger fraction of the portfolio can be allocated to the high return security. In case of the trading strategy, the Equity Curve that results from trading can be considered as just another financial security with its Sharpe Ratio. It is misconseption to view a high return strategy as extremely risky one. Note that the risk can be controlled by a simple rule! Subscribe to our Services to find out how.

NASDAQ	1374.51	-19.18	1.37%
DJIA	8474.78	-11.79	0.13%
S&P 500	896.74	-3.62	0.40%
NASDAQ*	1026.74	0.78	0.07%

NASDAQ-100 Index
The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail / wholesale trade and biotechnology. It does not contain financial companies including investment companies.