Market mood, the day’s average price, and fair tests

Check how many stocks are really rising, what the day’s average price means, and how old data can trick a test into looking better than it was.

Module 6 of 26, in the stage "How markets work". 6 lessons.

Lessons

1. How many stocks are rising?Count rising and falling stocks, and see what the count can hide. 18 min.
2. The day’s average price (VWAP)Work out the volume-weighted average price and tell a yardstick apart from a prediction. 18 min.
3. Why old test results can flatter a strategyAvoid using information from the future when testing with earnings, company data and index lists. 18 min.
4. Fear gauges: the VIX, funding and sentimentRead sentiment measures as descriptions of recent moves, not forecasts. 16 min.
5. Momentum and mean reversion: two opposite storiesKnow the evidence behind both ideas, and why having both on tap lets any chart be explained after the fact. 18 min.
6. Seasonality: calendar effects that shrink once people knowDescribe calendar effects, count how few independent observations they rest on, and see why many fade after publication. 16 min.

Concepts covered

• VWAP
• Volume
• Look-ahead bias
• Survivorship bias
• Fear and Greed index
• Volatility
• Funding rate
• Momentum
• Mean reversion
• Sample size

Keep going

• Previous module: The economic calendar
• Next module: Reading a company’s numbers
• All 26 modules and 157 lessons
• Open the first lesson in the course

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