Strategies · Library · Futures
§10.3.1Mean reversion
Contrarian trading - market activity
A variant of §10.3 Contrarian trading (mean-reversion)
Add filters: take contracts with the largest volume rise and the weakest open interest rise, then apply the reversal rule to them.
- Asset class
- Futures
- Held for
- Weeks
- Data
- Needs data ARCANE lacks
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Weekly change in volume and open interest.
- Entry and exit
- Weekly rebalance.
- Sizing
- As in 10.3.
How it fails
- Data cost
- Short leg
- Noisy filters
Data it needs
- daily prices
- volume
- open interest
No volume or open interest on futures.
How ARCANE uses it
Not usable.
Needs volume and open interest.
Filed under the mean reversion card
Buy last week’s biggest losers and sell last week’s biggest winners, betting that short, sharp moves partly undo themselves.
A paper plan from this card holds 1 to 10 days, stops at 1× the expected move and uses at most 50% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §10.3.1, p. 96 of the SSRN version. Described in our words. Mean reversion is ARCANE’s filing, not the book’s.