Check out variance ratios on intraday data; it is indicitive of mean reversion. I have posted an excel for this on my blog(autospreader.wordpress.com).
I agree. The only way is to assume that the change will probably happen and size your positions correctly. This happens over and over you get a nice spread that chops back and fourth, you push your size and it diverges and puts you way underwater.
hmm... yes. My personal experience with RTM is that good trade management can make a helluva difference to bottom line.
There was a nice progression of contributions over the years in this thread. The consideration of going away from and returning to a value may be best handled by having a context. Luckily almost all contexts were surfaced at one time of another. Once there was a polynomomial consideration introduced but the notation left out the normal symbol for noting the exponent part of the variable. Too bad. Historically, there were some neat guys who worked the turf. Too bad it was before PC's. The "weighting" part came up and volume was the mechanism for weighting. Then the next steps were not taken once this "information" was introduced. What is the relationship of RTM's signals to making money? The three modes within the damping dynamic seem to sort out the CW's definitions of trending and chop. The dampimg dynamic at play defines the polynomial terms' significance and that, in turn, iteratively refines the signal timing. Its more like a trombone that a trumpet, so to speak. The above is the more important of a trader's concerns for being able to have more and more productive time in the markets. The best signals of RTM, for me, are the trend beginning, trend volatility and trend ending signals (my inital comments covered this very early in the thread). I particularly like measuring the time lapse (separation interval) between the dominant periods of one trend following another trend I use seven criteria to define the difference betweeen a retrace and a reversal, ordinarily. One of the outstanding aspects of RTM signals is that a single signal from RTM defines te beginning of each. Knowing beginnings and differentiating each is a major key for straightening out potential traders withh over 5,000 hours of effort (sort of the last chance to turn around on the way out of trading). Trend volatility appears at the time when a retrace begins and reversals are defined when the time lapse between trend dominance begins. What about the trading time after a retrace ends and before a reversal begins? This is where a n RTM trader can use his probability distributiion look up to decide if their is a "kick in" value as the volume weighting shows a statisitcal significance in the making of money. This can also be used to show how tight the carving of the retrace exit becomes since the volume weighting is in decline during the latter prt of any retrace. Maybe this is observable best as an examination of the lowest values on the first derivative of the probability distribution. the above is just a collection of items not handled as yet in the thread. After thought. The exit of a RTM reversal is the beginning of the RTM retrace; I realize most people use that anyways.