If I understand your question, why not do both? Find a trend in a long time frame, then wait for price to drop below the mean in a shorter time frame and ride the price towards the mean of the short time frame and with the trend in the long time frame. And try not to do the opposite.
I think you're confusing pure Arb and MR. Unless you have access to speed and super low commissions don't waste your time with Arb strategies. Both momentum and MR can be great strategies if done correctly. As a trader not running large sums of money ($100 mil +) you probably want to focus on short term momentum (30 Sec - few hrs) in products that move (eg. Oil, Gold, leveraged ETFs). MR on the other hand usually have longer time frames but can still be short term (few sec-min) depending on market conditions. I would say a lot of MR is done a lot in trading curves in futures but can also be done in two highly correlated products (crack/crush spreads, gold/silver). One thing I've notice about traders who trade MR over longer time frames (few days) is that the don't take in to account that the mean is dynamic and they tend not to readjust their profit/loss targets. So IMO it boils down to this when creating and testing a strategy. 1) Know the product (ex dates, dividends, first notice-for futures, ATR) 2) Know your time frames I may have missed a few things so others are welcome to add some constructive thought.
I'm not disagreeing with the main points in your post but I certainly think a trader running even $20 mil can consider lots of strategies that don't fall into the sub few hour range and can certainly deal in less dramatic movers than gold and crude. Why not deal in ES or other slower movers if you have a feel for those instruments?
For me if you are going to build a momentum strategy you want something moves and you want something that gathers a lot of short term momentum very quickly. ES for the most part chop around during the day and are run by big players who are market making with some edge that only a few firms have (MM, Index Arb). It may move more smoothly over night but IMO that's not where you want to focus your time building a strategy. But more power to you if you got something that works during the day in ES. With $20mil there are plenty of short term momentum strategies that you can execute without becoming too big and distorting the market that are sub few hr time frames. IMO if you are doing strategies much longer than 4 hrs you are no longer momentum trading you are trend trading and to me that is not where you want to focus building a momentum strategy as a smaller trader. I assumed by slow you meant in momentum strategies. If you want something slow market making strategies are a much better fit.
How much can you really push into CL or GC at those moments when you most want the trade without horrible slippage? I've gotten some really bad fills on a one lot. If the liquidity is there in some size I find your argument convincing; I just know so little about what size actually is in these markets.
I've never actually done the market impact analysis on either one of those contracts so I could make up a number but that would just be a lie. But I did just looked at the chart of CL from yesterdays day session and in three 30min bars it traded down around $1.25 and then retraced $1.10 of that on 60k+ contracts. My guess would be at around 3k-5k contracts on an intraday momentum strategy you start to run into execution problems. Anyone trading that kind of size is very knowledgeable about the market microstructure and is blasting the market their way and taking all the contracts in their way before any retail and trader can react and actually other professionals as well. My advice to you is to use pay up ticks and go for more than a few ticks. Once you're trading 50+ contracts then start worrying about slippage.
I think in actual practice you are going to have to be worrying about size at a much lower level than 50 but I have zero experience trading size. Anyone here ever trade CL at 20 contracts or larger?