Testing Trading Conditions Against Historical Price Paths
Summary
This indicator compares the average price path after a chosen market condition with the average path after that condition is absent. The user selects a projection horizon and specifies a condition, such as a rising stochastic reading combined with price above a moving average. It then evaluates historical occurrences and plots three projected paths: condition met, condition not met, and an all-bars baseline. The labels report sample counts and cumulative projected changes; the condition paths also show their percentage differences from the baseline.
A spread adjustment can be applied to the projected change to assess whether the observed movement might cover that cost. The document presents the tool as a way to explore candidate edges across markets, not as proof of a profitable strategy. It gives no significance tests, out-of-sample validation, transaction-cost model beyond spread, or controls for repeated experimentation and overfitting. Results depend on the selected condition, projection length, market, and historical sample, and require further validation before trading.
Key ideas
- Compare historical average paths after a condition occurs with paths after it does not.
- Use the all-bars path as a baseline for interpreting conditional results.
- Choose a projection horizon to measure price behavior over a selected number of bars.
- Apply a spread deduction to gauge whether projected movement may cover that cost.
- Treat apparent historical advantages as hypotheses that need further validation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.