Which Market Regimes to focus on

Earlier this week I shared with you early results in some quantitative analysis we are working on together in the Trading Lab. 

Up to this point we have analyzed 10 assets to include the following futures contracts:

ES, NQ, ZB, GC, SI, CL, NG, ZC, ZW

And spot FX for EURUSD and USDJPY.

This will be expanded out to cover the rest of the most liquid futures contracts, all 28 main FX pairs and some Cryptocurrencies. 

The majority of the work we are doing on this is for our own insights for the members of the lab, to improve our trading success. 

We'd love for you to join us!

One of the big insights that we have been exposing are the characteristics of each market regime. I've talked about this before, when we can identify a Market Regime we can then drill down and harvest out the characteristics, the way a market trades. Then focus on building trading strategies to exploit those markets. 

A recent insight that we've been focusing on is how similar the characteristics of the Neutral Quiet, Neutral Volatile and Bull Quiet are.

Here's why that's AMAZING insight. 

Among our population of 10 assets that we've done this analysis on, 75% of all trading days are Neutral Quiet, Neutral Volatile and Bull Quiet, which I know refer to as Blended Bull Regime. 

This means that instead of building a strategy for all three of those regimes, I can focus on building one good strategy to account for 75% of all trading days in the last twenty years. 

This also means that you only need to worry about it not working 25% of the time. 

Keep in mind that regimes are the ruler of the macro trading environment, that is the overall month, quarter, year, decade...and not as effective on the daily/intraday type of environment. 

While it is tempting to try to find a magic mix of odd or unique indicators to give you the holiest of grails, the real magic is in statistical edges. 

One of the edges that we maintain at Pollinate is that we don't expect to win on every trade, we are well aware that we will have losing trades all the time, they are just part of the job.

Our ego isn't tied up in being right about a market, which free's us up to view the market as it is, instead of blaming duh algo's.