High-frequency trading
Pairs trade
Alternative trading system
Electronic trading
Stock exchange
Best insight from top research papers
The most profitable proven trading strategy appears to be momentum investing, which has consistently earned non-zero returns over time . This strategy involves selecting stocks based on their past performance over a specific time period, such as two to twelve months. It has been observed to earn average monthly returns of 1.57% over the period from 1965 to 2014, and even larger returns of 2.27% in the most recent ten-year period . However, it is important to note that the profitability of this strategy may be affected by transaction costs, especially when trading in smaller stocks . Nevertheless, a strategy that focuses only on the winner portfolio and avoids trading the loser portfolio has been found to earn strong and persistently abnormal profits, even after accounting for transaction costs .