Trend Day Indentification

2022年4月8日

Volatility is cyclical, after a large move up or down the market typically "ranges" during the next session. Directional order flow that enters the market during this subsequent session tends not to persist, this non-persistency of transactions leads to a non-trend day which is when I trade intraday reversionary strategies.

This script finds trend days in BTC with the purpose of:

1) counting trend day frequency
2) predicting range contraction for the next 1-2 days so I can run intraday reversion strategies

Trend down is defined as daily bar opening within X% of high and closing within X% of low
Trend up is defined as daily bar opening within X% of low and closing within X% of high

default parameters are:
1) open range extreme = 15% (open is within 15% of high or low)
2) close range extreme = 15% (close is within 15% of high or low)

There is also an atr filter that checks that the trend day has a larger range than the previous 4 bars this is to make sure we find true range expansion vs recent ranges.

Notes:

If a trend day occurs after a prolonged sideways contraction it can signal a breakout - this is less common but is an exception to the rule. These types of occurrences can lead to the persistency of order flow and result in extended directional daily runs.

If a trend day occurs close to 20 days high or low (stopping just short OR pushing slightly through) then wait an additional day before trading intraday reversion strategies.