Investment Thesis

Establish position when the price action shows clear deviation from supply-demand equilibrium

  1. Define the “noise region” (no exploitable intraday trend)

move = close/open - 1

Average move = rolling mean 

Define upper bound as: (*we don’t use the open price directly to adjust for overnight gap)

Max (open price, previous close) * (1+ average move) 

Define lower bound as: 

Min (open price, previous close) * (1 - average move) 

2. Decide when to enter a long/short position

In bi-hourly (HH:00, HH:30) intervals ( to avoid overtrading because of short-term price fluctuations ), 

if the price crosses above the upper bound, go long

if the price crosses below the lower bound, so short

3/ Decide when to exit the position

Define long_stop_price as max(vwap_price, upper_bound)

Define short_stop_price as min(vwap_price, lower_bound)

Exit long position when is_long and ( bar.close < long_stop_price or market close )

Exit short position when is_short and ( bar.close > short_stop_price or market close )


 

* VWAP is the Volume-weighted average price

VWAP = Cumulative Typical Price x Volume/Cumulative Volume


 

Where Typical Price = High price + Low price + Closing Price/3