Measuring Price Velocity and Comparing Trading Strategy Tests
Summary
The article treats price movement as velocity: price change divided by elapsed time. It compares averages calculated over whole candles with measurements on smaller timeframes and tick data. A candle average is easy to interpret but hides the path inside the candle; breaking it into shorter intervals reveals changes in pace, while tick-based readings are more current and noisier. Momentum and ADX are presented as indirect ways to gauge price speed or trend strength.
The article then tests three strategy approaches: direct average velocity filtered by trend direction, velocity measured relative to tick count, and indicator-based proxies. Its examples use MetaTrader strategies and backtests, and the reported comparison favors the latter two approaches on Sharpe ratio and trade correlation. The author cautions that the first approach’s best optimization lacks consistency, that the tests cover only a limited set of measurement methods, and that results depend on parameters and market conditions. These comparisons are exploratory evidence, not proof that any method will generalize or remain profitable.
Key ideas
- Average price velocity measures price change over a chosen time interval.
- A single candle average conceals the sequence of price changes within that candle.
- Shorter intervals reveal more detail, while tick-based readings can be highly erratic.
- Trend filters are needed when velocity measures magnitude without direction.
- The reported tests favor tick-relative and indicator-based approaches, but do not establish robustness.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.