• Registered: 2016-05-16
  • Posts: 190

Topic: Trending/ranging market filter

Hi,
I am building system portfolio. At the time there is 10 systems. 9 of 10 is trend following, break out systems, and one mean reversion. How you know you can separate them in these 2 big groups. It seems that a lot easier to make money is when "trend is you friend" smile However I want more diversified portfolio, I need more mean reversion system in it... that in slow periods, when markets tend to range I can offset losses from other trending, break out systems. Maybe someone knows good way how to filter market conditions to trending/ranging. If someone knows good indicator I could set it to generator and look for mean reversion strategies. Maybe some already walked this path? I saw somewhere that it is called regime analysis, however not much valuable info about this. Any info are welcome!

  • Registered: 2016-05-20
  • Posts: 57

Re: Trending/ranging market filter

Honestly haven't found the best combo within fxsb yet but ADX is an indicator a lot of people use for determining if a market is trending programmatically.  You might be able to look at larger timeframes to see if they're also breaking out. 

The holy grail is a system that can flip back and forth between range bound and trending but that's easier said than done.  Would love to see if others have ideas.

3 Reply by Irmantas (edited by Irmantas 2016-08-06 09:11:04)

  • Registered: 2016-05-16
  • Posts: 190

Re: Trending/ranging market filter

Hi GizmoTN,
Thanks for replay. I heard about ADX and I am using it with some trend following. I am checking if adx is rising, it means market is expanding, so it is good check for trend, for break out strategy. I guess for range condition it should be checked if ADX is <30 level, or/and falling, what means contracting market. And how you said, good idea to check if Higher time frame doing the same. Will try to set it to generator and see what will be found.

If Mr. Popov do not mind here is some related links what I found about regime analysis if someone is interested for further research:
http://www.traderslaboratory.com/forums … gimes.html
http://www.priceactionlab.com/Blog/2015 … indicator/
https://www.amazon.com/Trading-Regime-A … op?ie=UTF8 - book with this name, however bad reviews....

  • Registered: 2016-05-20
  • Posts: 57

Re: Trending/ranging market filter

I've not used it before other than in generated strategies but it looks like the choppiness index indicator is also something that can be used to help determine if it's trending (not sure how reliable etc.)

  • Registered: 2016-05-16
  • Posts: 190

Re: Trending/ranging market filter

This one looking interesting! Will try to generate something with it  smile Looked to previously posted book's link content table. I guess we can use these indicators for that purpose (deciding if market is trending or ranging, or in other words regime switching) . In theory this regime analysis/switching should work great. Some systems works great in trends, others in ranges. So you decide in what mode market is in and only allow profitable systems to trade in this market mode. Will try to experiment. If I find something I will post it here.

https://s8.postimg.org/jlkal01j9/Screenshot_1.png