So as a starting point, for this post, I classified price action into two categories - mean reversion (MR) and non mean reversion (Non-MR). In later posts, my intention is to cover specific patterns like Toby Crabel NR7, NR4, Hook etc.
Some Definitions:- MR Day - Today's close is lower than close two days ago.
- Non-MR Day - Today's close is higher than close two days ago.
- Calendar returns by MR Day - If today is an MR Day, buy @ market the next day open and sell after 5 days.
- Calendar returns by Non-MR Day - If today is a Non-MR Day, buy @ market the next day open and sell after 5 days.
Caveats - Friction less results.
Results:
Calendar returns by MR Day shows good positive edge around 3rd week of the month inline with other studies.
Calendar returns by Non-MR day shows positive edge around 9th/10th day of the month. I have to check again other posted results to see if the edge shows up there also. For now I don't think it is as good as the other edges though.
What else do you see in the results?
Side note:
Originally I started the series with intention to validate and to create a better "End of Month" strategy. Some savvy readers might have noticed by now that one can develop multiple strategies from the results of these studies and not just "End of Month" strategy. For example, do you notice any thing particular in the results of the last post? Also one can build day trading strategies like Opening Range Breakout (ORB) building upon these type of studies. So my revised thinking is to keep this series going focusing on calendar day performance profile by various criterion and do some strategy posts as a separate series in parallel. Thoughts? Feedback?
Wish you all good health & good trading!
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