Earlier this week I wrote about trading the different Market Regimes based off of the SQN Indicator. To be clear, there are a number of ways to go about categorizing Market Regimes, and the SQN is just one of them.
Being able to categorize a market by regime is extremely useful, but without knowing the characteristics of the regimes (and how to exploit them for profit) is where the real power is.
Let's look at a couple of different ways to categorize market regimes.
Macro Economics - this is probably the most quoted and talked about in business news, think interest rates, unemployment, growing GDP, PMI's, etc.. You will find no shortage of market categorization and predictions from this regime.
Low Volatility/High Volatility/Trending/Mean Reversion - One of my favorite and most useful ways to categorize a market regime. This can be done using indicators like SQN and ATR (which I've written about before). These are derived from the actual price direction or the changes in price %, which allows you to compare against other periods to find characteristics.
Fundamentals - Using PE Ratios, growth, management teams performance, sectors, and other traditional financial analysis tools you can decide if a company is undervalued, in a growth phase, close to bankruptcy and many other ideas.
These are abut a few different ways to categorize market regimes, there are many more.
For the purposes of how we trade here at Pollinate we focus on Low/High Volatility and Trending/Mean Reversion using quantitative tools derived from price.
Once we've got a tool that we are comfortable with to help us identify and sort the different categories of regimes we can then focus on trying to identify unique characteristics of each category.
Believe it or not there is a LOT of work to be done in this space.
It was suggest to me this week if I'd write a book about Market Regimes, and that's what I'm going to do.
I will be working with the other members in the Trading Lab, researching, backtesting, and learning about different market regimes and a slew of insights.
If you are looking to get much further ahead, faster, with other like minded traders who are working hard every day to get better then you should join us there.
The Trading Lab is a Slack Channel (live chat) 24-7 monitoring markets, world events and most importantly a place to collaborate with other systems traders.
From FX, Futures, Crypto, Bonds and Equities, our fellow systems traders are involved in all sorts of markets.
Collaborate with other systems traders who have built their and run their own trading systems as well as traders who are just starting out.
This is a place to learn, to teach and to become better together, A TEAM! As systems traders we are able to monitor and improve upon weaknesses in our trading.
Not just the systems themselves, but we must focus on optimal human performance as well, health, wellness, fitness, habits and techniques to live better lives.
PS - I did a podcast about the 5 different Market Regimes, have a listen https://anchor.fm/pollinatetrading/episodes/Market-Regimes-and-Characteristics-Of-Each-Regime-egbcua
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