Intrinsic-Time Coastline Trading with Cascading Limit Orders

Summary

The document explains a counter-trending strategy built around intrinsic time: price movements trigger events when they reverse by a chosen threshold, dividing the path into directional changes and overshoots. Eight agents trade long and short at four thresholds. Each adds positions through limit orders as price moves against it, then takes profit on individual positions as price reverts. Inventory-based threshold skew, smaller additions at higher inventory, a liquidity measure, and an inventory cap are intended to constrain accumulating exposure.

It reports a six-month EURUSD backtest with positive net profit, while breaking out take-profit closures, positions still open at the test end, commissions, and swap. The document emphasizes that the forced closures are unrealized cascades that would remain open in live trading, and that financing costs were substantial. It also notes that the live version lacks the paper strategy’s whole-position exit, default lot sizing compresses the fractional sizing tiers, and a single pair and test period cannot establish an edge. The implementation requires a hedging account and tick-based testing.

Key ideas

• Intrinsic time advances when price confirms a reversal by a selected threshold, rather than at fixed calendar intervals.
• The strategy adds contrarian positions at successive intrinsic events and uses individual take-profits to unwind them during reversals.
• Inventory changes both the event thresholds and the size of new additions, while a liquidity indicator further scales position size.
• The live implementation caps inventory but does not include the reference strategy’s whole-position exit.
• A rising realized balance can coexist with open losing positions, so equity and end-of-test closures matter when assessing results.

Tags

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