Omega Ratio Explained: Formula, Worked Example, and the Omega Curve
The Omega ratio explained: the gains-over-losses formula, a plain-number worked example, how to read the Omega curve, and why it catches skew that Sharpe misses.
9 min read ▮ Strategy family
Backtesting & Tools
Historical Volatility Formula: How to Calculate It Step by Step
The historical volatility formula explained: log returns, standard deviation, annualizing with √252, a plain-number worked example, EWMA and range estimators.
8 min readVolatility Targeting: Formula, Worked Example and Pitfalls
Volatility targeting explained: the exposure formula, how to estimate realized vol, a plain-number worked example, what the research says, and where the rule breaks.
7 min readAlpha Decay: How to Know When a Trading Strategy Stops Working
Alpha decay explained: why trading edges erode, and a rolling-expectancy and drawdown test for deciding when a strategy has stopped working.
9 min readSortino Ratio: How to Measure Downside Risk (Formula + Example)
The Sortino ratio explained: the downside-deviation formula, a plain-number worked example, how it differs from the Sharpe ratio, and the mistakes that make it lie.
9 min readMarket Inefficiency: What It Is and How Traders Exploit It
What market inefficiency really means, why mispricings persist despite arbitrage, and how traders find and test an exploitable inefficiency step by step.
8 min readBetting Against Beta: How the Low-Beta Anomaly Produces Alpha
Betting against beta explained: why low-beta stocks beat CAPM's forecast, how the BAB factor is built, and how to test the anomaly in your own backtests.
9 min readWalk-Forward Analysis: The Rolling Out-of-Sample Test Explained
What walk-forward analysis is, how to set up rolling optimization and test windows, and how walk-forward efficiency separates robust strategies from curve fits.
8 min readOut-of-Sample Testing: How to Tell a Real Edge From a Curve Fit
What out-of-sample testing is, how to split your data without fooling yourself, and a worked example showing how it exposes curve-fit trading strategies.
8 min readTrade Expectancy: How to Calculate What Every Trade Is Worth
The trade expectancy formula tells you what your average trade is worth. How to calculate it from your log, what counts as good, and why win rate misleads.
7 min readProfit Factor in Trading: How to Calculate It and What's Good
What profit factor measures in trading, how to calculate it from gross wins and losses, what counts as a good number, and the traps that inflate it in backtests.
8 min readLook-Ahead Bias: The Backtest Error That Manufactures Fake Alpha
What look-ahead bias is, the five ways it sneaks into backtests — restated data, same-bar fills, full-sample statistics — and how to detect and prevent it.
9 min readCalmar Ratio: How to Judge a Strategy by Its Maximum Drawdown
What the Calmar ratio measures, how to calculate it from CAGR and maximum drawdown, and why the 3-year window can hide risk — with plain-number examples.
8 min readWe Backtested Buying the Dip on 36 Years of S&P 500 Data
A buy-the-dip backtest on every S&P 500 drawdown since 1990: win rates by dip depth, what −5% vs −20% dips returned, and the full dataset to download.
7 min readSmart Beta ETFs: What They Are and How to Pick One That Works
Smart beta ETFs promise factor premiums at index-fund prices. How the weighting rules work, where returns get diluted, and how to vet a fund before buying.
8 min readFactor Investing: How Value, Momentum and Quality Drive Returns
Factor investing targets the traits that explain stock returns — value, momentum, size, quality, low volatility. How the premiums work and how to use them.
8 min readRisk-Reward Ratio: How to Tell if a Trade Is Worth It
The risk-reward ratio weighs what you can gain against what you risk on a trade. Learn to calculate it, pair it with win rate, and avoid the classic traps.
8 min readTrading Journal: How to Keep One That Finds Your Edge
A trading journal turns a pile of trades into data you can act on. Learn what to log, a worked example, and the mistakes that make most journals useless.
7 min readPosition Sizing in Trading: How Much to Risk Per Trade
Position sizing in trading decides how much you risk per trade — the lever that controls survival. Learn the fixed-fractional method with worked numbers.
7 min readHow to Backtest a Trading Strategy (Step by Step)
Learn how to backtest a trading strategy properly: clean data, realistic costs, out-of-sample testing, and the metrics that separate edge from luck.
8 min read