Following jhughey's suggestion, i am posting the message below in the Advanced Coding session.
Basically, I am curious to know from Forum members what works and what doesn't for them in terms of indicators that try to identify mean-reverting/non-mean-reverting markets and respective trading system for each regime. For instance, I am experimenting with oscillators (ie, rsi) for mean-reverting periods and with breakout systems for non-mean-reverting periods. As for identifying the regime, I find that ADX is a bit too slow and misses beginning of meaningful moves. I am studying simple indicators that measure % change from X-period High -- for instance, (hhv(h,50)-low)/hhv(h,50) -- above/below a certain level, as indication of mean-reversion. Nothing too earth-shattering, just looking for a simple and fairly effective method.
I have recently read an interesting article in Futures Magazine about the existence (or lack thereof) of mean reversion in stocks. Under the authors' apparent conclusion that there is a significant degree of autocorrelation in the SPX with a one-day lookback period, they suggest a simple trading system where one would buy at close if close<open and sell at close if close>open.
Further looking into the mean reversion assumption, I tested (with optimization - sorry) the following system on SPY from 3/12/1997 to 5/8/2009, including some long-term trend filter:
LE: ref(c<ref(O,-8) and l>mov(c,282,e),-1)
LX: ref(c>ref(O,-1) or l<mov(c,282,e),-1)
SE: ref(c>ref(O,-1) and h<mov(c,282,e),-1)
SX: ref(c<ref(O,-8) or l>mov(c,282,e),-1)
With the following parameters:
Interest 0%
Margin 3%
100% available equity
Position Limit 1
Long Initial 100%
Long Maintenance 0%
Short Initial 200%
Short Maintenance 101%
Commissions $10
Realistic Market Price No
Delay to Open 0
All trades at Close
The results stats look good and the equity curve almost improbably good. Would anybody care to post comments on this system? Is it realistic from a practical point of view?
Many thanks.
ZigZag
