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Source: backtest.substack.com​

Using Markov Chains to Model Market Regimes

5/15/2026

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Markov Chains are a foundational tool in probability and quantitative finance, often used to model regime changes such as trending, mean-reverting, high-volatility, and low-volatility market states.

MIT lecture covering the fundamentals of Markov processes and discuss how these concepts can be applied to trading system design, regime classification, and probabilistic forecasting.



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    Dave Johnson

    I'm Dave Johnson, a former investment advisor and quantitative system developer with over 30 years of experience building and trading mechanical systems. These days I focus on rules-based research, honest backtests, and sharing what the data actually shows.

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