Market Regime Trading Redux
One topic of avid interest to Quantivity readers is market regime trading: systematic trading via heterogeneous portfolio of algorithmic trading strategies, whose dynamic selection and optimization is driven by quantitative analysis of current market regime.
This topic was originally introduced in two previous blog entries: Market Regime Dashboard and Trade Using Market Regimes?. By any measure of reader interest (active or passive), the concept of regime trading is unexpected popular. Several subsequent months have been spent in literature review, discussion with colleagues, and quiet reflection.
Such effort confirms market regime analysis indeed appears to be a worthy topic, as it squarely acknowledges the admittedly unpleasant financial postulate: there is no single low-frequency trading strategy that works consistently under all market regimes. Or, in trader-speak: “there is no holy grail”. This postulate also underlies why naïve backtesting is bogus.
Quantivity will take up market regime trading as a central theme in 2010, albeit not exclusively.
Posts will seek to combine profitable trading strategies, computational implementation, and mathematical rigor. Collaboration is sought with interested readers and fellow bloggers, whether in public or private.