Hurst Exponent Regimes for Trend and Mean-Reversion Filtering

Summary

This document explains a rolling Hurst exponent indicator intended to classify price behavior as persistent, anti-persistent, or close to a random walk. It estimates the exponent with rescaled-range analysis: price deviations are assessed over subsegments of different sizes, then a log-log regression of range-to-volatility statistics yields the exponent. A short exponential moving average smooths the plotted estimate, and upper and lower thresholds distinguish trend and reversion regimes.

The suggested use is as a slow regime filter alongside other tools: give trend-following setups more weight in persistent conditions and treat directional signals cautiously in the reversion zone. The note favors longer-horizon analysis and describes a chart example in which the line follows directional phases and a choppy interval. This is illustrative rather than a performance test; no out-of-sample results or proof of predictive power are presented. Estimates require a full history window and may be sensitive to instrument, timeframe, data quality, and chosen thresholds.

Key ideas

• The indicator estimates price persistence using rolling rescaled-range analysis.
• An exponent near the midpoint represents random-walk-like behavior, while higher or lower readings indicate persistence or anti-persistence.
• A smoothed line and two thresholds label trend, neutral, and mean-reverting regimes.
• The proposed role is a gradual filter for other strategies, not a standalone trigger.
• The document gives an illustrative chart description but no quantified performance validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.