Intraday mean-reverting and momentum trading strategies?

Discussion in 'Strategy Development' started by mizhael, May 22, 2009.

  1. Theoretical research show a very strong correlation in short timeframe.

    Could anybody give me some pointers about how to capture the strong temporal correlation in intraday and high frequency trading?

    Any success yet given the transaction cost?

    Is there a way to utilize the correlation from a market maker's perspective or scalper's perspective?

  2. The shorter your timeframe, the more "noise" there is in the market. No larger trend, even if it exists, may be visible.

    There are rare intraday momentum breakouts, but you have to be glued to the screen all day to catch them, if you are fast enough.

    Intraday, you are playing against automated platforms, which catch various temporary market effects much faster, within milliseconds, and the pros, which have their own agenda.

    You can make money, but you may actually be better off using a randomly selected entry point, for example, minute # 200 of the trading session, and a high-probability profit target, based on current volatility.

    On small time frames, volatility and ranges is the name of the game. Check out Hoadley's Probability calculator and see for yourself.
  3. My research says that markets have weak intra-market correlation in a short timeframe.

    How you exploit something depends on what you tested and how you confirmed the initial idea. Without that, there's no point of providing advice. Even more, there's no point of accepting other's advice. Simple example, I can be talking about delta neutral. You can be talking about gamma scalps.