Correlation Trend Indicator and Threshold-Based Crossover Strategy
Summary
The document explains the Correlation Trend Indicator (CTI), which compares a price series with an ideal straight trend line using a correlation measure. It describes short- and long-period CTI values as distinct views of trend rather than simply smoothed versions of one another. The included indicator implementation calculates a normalized correlation for each selected lookback, though the text gives no independent evaluation of the calculation or its robustness.
The author describes a proposed currency strategy that buys when a short-period CTI crosses above a longer-period CTI while both readings are below a negative threshold, and sells under the inverse condition. Exits use a separate volatility-based stop. The article notes that CTI crossover signals may have weak predictive power and are difficult to trade directly; the author's claim of a non-random relationship is not backed here by detailed test results. Parameter optimization with machine learning is presented as a possible future investigation, not a demonstrated result.
Key ideas
- CTI measures how closely prices align with a straight idealized trend over a chosen lookback.
- Using separate short and long periods is intended to distinguish trend horizons.
- The proposed currency system uses CTI crossovers alongside threshold conditions for entries.
- A separate stop method is used for exits.
- The document cautions that crossover predictiveness may be too weak and supplies no rigorous performance analysis.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.