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I'm specifically checking what happens after the market make a new high/low intraday. I would love to test this programatically, but not sure how to do that?
For most other stuff where it's easier to run the numbers I do of course do that.
Here's an example of what I mean. On this particular day, the market always retraced further or to the breakoutpoint of the prior high. There are exceptions, but I find that this is typical for ES. In practice, this means that with ES, you can usually enter on a pullback and that a breakeven stop is usually a bad idea.
I've followed ES on/off for a few years now, but only in the last 6 months I've been following it more closely again. So, I'm comparing with this time period and when I used to trade it actively 4-5 years back.
I was hoping to get comments from some experienced traders as I know better than to trust my own memory and perceptions, but yes, my perception is that while ES have always retraced 'more' than other instruments, it's become even worse in the most recent past.
Something like interest rates are a mean reverting process. The S&P has a persistent long term drift because of economic growth.
The issue with testing what you mean is you have to define it with exact precision. What would price have to do to prove you wrong?
Like one of those green lines on your chart. How many ticks away from the green line, how many times and for how long to invalidate the idea?
Then you would just have to do the same thing with positive results that prove you correct.
Putting those rules to code then would be absolutely trivial. It is defining exactly what you mean is when things get thorny.
Or central bank intervention/support. Depending on who you ask, I guess.
On a daily/long-term basis - S&P surely have been trending very well for most of the last 10 years. Possibly even more than it has done in the past?
This is less true on an intraday basis, although it's certainly true that due to the strong daily trend it has probably increased the number of days where the market close at the top of the range on the day.
But see for example yesterday. We closed pretty much where we opened, i.e., reversion to the mean.
Your or other's definition of mean-reversion might not match what I have in mind. My point is merely that ES is a thick instrument which tends to retrace a lot and it's rare with true momentum moves where the market persistently goes in one direction without retracing say 2,5 points counter to that move. I also have the data to prove that.
Well, I simply wanted to observe what happens after the market made a new intraday high/low. I imagine that to be hard to test programmatically?
But - a test could be set up to test the following:
1. If ES makes a new intraday high, i.e., exceeding the current high - how often does price revert back to the prior high OR MORE - before eventually going back up and exceed the new high?
2. You'd also need a filter to determine the current high. In a trending market - new highs will be made continuously, so you're not testin those. It would have to be a local top defined somehow. Possibly using a time-filter.
If you have the resources to do such a test, it should be interesting to hear the results. I'm sure it can be done, but for me it's more interesting to test it visually. Especially since I trade from charts. I want to see how it looks visually as well.
Couldn't it be, that a higher degree of ultra short-term HFT's are entering on breakouts only to take profit quite fast, resulting in a deeper pullback than before they were a thing?
(a guess from a novice, that only has 4 months theoretical knowledge)