Nick L.

Nick L.

Denver Metropolitan Area
297 followers 297 connections

About

Hello everyone! I'm Nick and machine learning is my craft. I’m an experienced…

Experience

  • Buzz Solutions Graphic

    Buzz Solutions

    Denver, Colorado, United States

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    Aurora, CO

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    Greater Denver Area

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    North America

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Education

Licenses & Certifications

Publications

  • Counter-Trend Trading: A Systematic Approach to Navigating Choppy Markets

    Synergie Capital Management

    Most investment strategies struggle in choppy environments where day-to-day direction changes dominate price action. Nonetheless, short-term counter-trend strategies thrive in these environments, offering a systematic approach to harvesting returns from back-and-forth price movements. Particularly in equity markets where day-to-day direction changes are common, counter-trend models generate returns by trading in the opposite direction of recent price movement. These systems produce high…

    Most investment strategies struggle in choppy environments where day-to-day direction changes dominate price action. Nonetheless, short-term counter-trend strategies thrive in these environments, offering a systematic approach to harvesting returns from back-and-forth price movements. Particularly in equity markets where day-to-day direction changes are common, counter-trend models generate returns by trading in the opposite direction of recent price movement. These systems produce high accuracy, short duration trades and recover from drawdowns quickly.

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  • The Short-Term Counter-Trend Trading Strategy Guide

    The goal of this strategy guide is to introduce the concept of short-term counter-trend trading and explain in detail when this strategy works best and when it struggles. Counter-trend trading attempts to systematically take advantage of noise in the financial markets, but its performance is also influenced by cycles of volatility. Noise is not a well understood concept and is often confused with volatility. Therefore, we have devoted a substantial portion of this guide to defining volatility…

    The goal of this strategy guide is to introduce the concept of short-term counter-trend trading and explain in detail when this strategy works best and when it struggles. Counter-trend trading attempts to systematically take advantage of noise in the financial markets, but its performance is also influenced by cycles of volatility. Noise is not a well understood concept and is often confused with volatility. Therefore, we have devoted a substantial portion of this guide to defining volatility and noise and explaining their differences. This includes a breakdown of the return and risk characteristics of counter-trend trading based on various volatility and noise levels. We hope this guide will be an objective resource that can be used to explain periods of under- and out-performance of short-term counter-trend strategies.

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  • Overreaction Moves Markets

    Investment Advisor

    Overreaction to news or events creates volatility in financial markets that can make life difficult for investors, but it is a source of consistent opportunity for short-term countertrend traders.

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  • The impact of stop losses on short-term countertrend trading strategies

    Journal of Investment Strategies

    Stop losses are a common form of risk control for trading strategies, but there is a lack of empirical research regarding their effectiveness. Stop losses alter the statistical characteristics of a trading strategy, which makes it difficult to assess the trade-off between improved risk control and return degradation. To evaluate a stop loss method equitably a systematic and quantitative approach is needed. This paper uses Ralph Vince’s optimal fixed fractional position sizing combined with…

    Stop losses are a common form of risk control for trading strategies, but there is a lack of empirical research regarding their effectiveness. Stop losses alter the statistical characteristics of a trading strategy, which makes it difficult to assess the trade-off between improved risk control and return degradation. To evaluate a stop loss method equitably a systematic and quantitative approach is needed. This paper uses Ralph Vince’s optimal fixed fractional position sizing combined with maximum drawdown to normalize the risk and return characteristics of a trading strategy. This risk and return normalization is then used to assess the effectiveness of stop losses as a risk control method for two short-term countertrend trading strategies. Specifically, a range of fixed percentage stops and a range of volatility scaled stops were evaluated. It was found that, due to the distinctive return path of short-term countertrend trades, stop losses were ineffective as a risk control system for these types of models.

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  • A Study of Short Term Mean Reversion in Equities

    361 Capital

    Mean reversion in equities has been consistently documented as a source of positive alternative investment returns over the last nine decades. Mean reversion investing attempts to capitalize on the tendency for an asset’s price to move from extreme levels towards long term averages and it can be conducted on an absolute or relative basis. In an absolute mean reversion model a stock’s attractiveness is determined solely by the relationship of its current price to its long term average. The…

    Mean reversion in equities has been consistently documented as a source of positive alternative investment returns over the last nine decades. Mean reversion investing attempts to capitalize on the tendency for an asset’s price to move from extreme levels towards long term averages and it can be conducted on an absolute or relative basis. In an absolute mean reversion model a stock’s attractiveness is determined solely by the relationship of its current price to its long term average. The downside to this is that the model will persistently flag stocks as undervalued in a declining market and overvalued in a rising market. Alternatively, in a relative mean reversion model a stock’s attractiveness is judged relative to the movements of other stocks. The benefit of using a relative measure of mean reversion is that the underlying drift of the equity market is removed allowing each stock’s attractiveness to be determined from the merits of its idiosyncratic movements relative to the group. In a rising market, a relative mean reversion portfolio will concentrate its long positions in stocks that have appreciated in price the least, while focusing its short positions in stocks that have appreciated in price the most. Conversely, in a falling market the portfolio will concentrate its long positions in stocks that have depreciated in value the most, while focusing its short positions in stocks that have depreciated the least. In this way, the model is indifferent to the absolute return of any of its holdings because it derives return from the relative movement of its long and short positions.

    This paper examines possible explanations for the persistence of the mean reversion anomaly, evidence of short term mean reversion in U.S. stocks, and factor exposures associated with a market neutral mean reversion portfolio. Ultimately, the paper shows that short term mean reversion is a consistently profitable strategy that has marginal correlation to other risk factors.

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  • COUNTER-TREND TRADING

    361 Capital

    Counter Trend Trading is a brief overview of systematic counter trend trading applied to equity markets. The paper outlines a simple counter trend model to demonstrate the mechanics of counter trend trading and highlight the benefits of capitalizing on volatility and noise in equity markets. It also touches on the psychology behind counter trend trading and the opportunity set for counter trend trading in the future.

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