There's this idea that it's profitable to trade index products with the momentum intraday, especially when higher highs or lower lows have been made, and I just don't think these generalized ideas apply to everything.
So out of curiosity, I looked at some historical data of QQQ (Nasdaq 100 Index ETF) since Apr. 2001, and tested the opposite theory of mean reversion.
Basic rules:
Longs: If QQQ touches the previous day's low, we buy at that price, and hold position til closing of the NY session.
Shorts: If QQQ touches the previous day's high, we sell short at that price, and hold position til closing of the NY session.
Interestingly, here are the resulting stats for the trades,
So we had about 1,100 trades each side, and they all averaged 0.06% net profit per trade, before transaction costs. This also means, that the momentum trade, buying on higher highs, and selling on lower lows, would have lost an average of 0.06% + transaction costs / trade.
Equity curves for the theoretical mean reversion trades.
S: Shorts
L : Longs
T: Total
So out of curiosity, I looked at some historical data of QQQ (Nasdaq 100 Index ETF) since Apr. 2001, and tested the opposite theory of mean reversion.
Basic rules:
Longs: If QQQ touches the previous day's low, we buy at that price, and hold position til closing of the NY session.
Shorts: If QQQ touches the previous day's high, we sell short at that price, and hold position til closing of the NY session.
Interestingly, here are the resulting stats for the trades,
Equity curves for the theoretical mean reversion trades.
S: Shorts
L : Longs
T: Total
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