Directional-Change Intrinsic Time and the Alpha Engine Trading Model
Summary
The article presents intrinsic time as an event-based alternative to fixed calendar sampling: a clock tick is recorded when price reverses from its latest extreme by a chosen threshold. It explains how each completed move is divided into a directional-change leg and an overshoot, then describes an online operator that tracks these events, returns, tick counts, and elapsed time. The operator is used to measure price-path scaling relationships across thresholds.
The author connects this framework to a counter-trending Alpha Engine, describing its implementation as an Expert Advisor and its evaluation on real EUR/USD ticks and a volatility-matched random walk. The introduction says the analysis uses one pair over a six-month window and reports testing the engine on random walks and in a strategy tester. However, much of the article, including detailed scaling-law and performance results, is omitted from the supplied text. Its empirical scope is therefore narrow in the visible account, and the reported profitability claims cannot be independently assessed here.
Key ideas
- Intrinsic time advances when price confirms a reversal of a chosen size from its recent extreme.
- A completed move is divided into a threshold-sized directional change and an overshoot beyond the prior change point.
- The event operator tracks price changes online and can measure path statistics across thresholds.
- The article describes testing scaling laws on EUR/USD ticks and a volatility-matched random walk.
- It presents an event-driven, counter-trending Alpha Engine, but the supplied excerpt omits much of the detailed evidence and results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.