One of the first tests I did when I got AmiBroker twenty years ago was a mean reversion test. It was a classic set up, a stock in an uptrend, followed by a pullback. But the entry differed from what I do now. The entry waited for a confirmation of the trend back up. The trade would enter when the stock crossed above the previous day’s high. The exit was also different. The exit was on a close below the lowest low of the last (2,5) days. The results were not very good, so I gave up on it. I did not do test entering on the open or on further intraday pullback or exiting on the bounce. If I had, I would have started my mean reversion trading several years earlier, which would have added several more years of large edges trading. Oh well, I was just a beginner researcher then.
Recently I got curious about waiting for confirmation before entering a trade. Now that I know more about entries and exits, would it give good results. How would these results compare to waiting for further intraday pullback or entering at the open? Time to discover..
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Good Quant Trading,
Cesar
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