Building Automated Trading Strategies October 2018 | Page 22

ii. Price channel breakouts
iii. Technical analysis indicators
iv. Moving Averages (for example combining a 50-day and a200-day
moving average)
(2) Volatility-Expansion Strategies
There are several automated trading strategies based on volatility (volatility
expansion, volatility breakouts, etc.). The volatility expansion is a short-term
strategy that focuses on sudden changes of volatility in the price of financial
assets. Price gaps may also play an important role for the volatility expansion
strategy. Gaps on a price chart are areas where the price move up or down,
with no trading in between.
At a Glance:
i.
Combining market volatility with price metrics (price gaps may also
play an important role)
ii.
The strategy offers a high winning percentage but low profits per
trade
(3) Mean-Reversion Strategies
The Mean-Reversion strategy assumes that the price of a financial asset will
revert to its mean price 80% of all times. In other words, 80% of all times the
markets are ranging. That means extreme highs and lows create good
opportunities to sell or buy the market and wait for the price to return to its
mean.
The Mean-Reversion Strategy:
i. Using historical data to generate an average asset price
ii. Calculating the current price range
iii. Breaking the range triggers the execution of a trade
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