Hurst Exponent Trend/Mean Reversion

Entry Logic

• The Hurst exponent is used to measure the long-term memory of a time series.
• A Hurst exponent greater than 0.5 indicates a trending market, while a Hurst exponent less than 0.5 indicates a mean-reverting market.
• If the Hurst exponent is greater than 0.5, a trend-following strategy is used.
• If the Hurst exponent is less than 0.5, a mean-reverting strategy is used.
• The entry is triggered by a signal from the appropriate strategy.
• Confirmation is provided by a price action signal that is consistent with the identified market type.
• The timeframe is determined by the data used to calculate the Hurst exponent.
• The location context is provided by the Hurst exponent.
• The market condition is either trending or mean-reverting.

Exit Logic

• The exit is triggered by a signal from the appropriate strategy.

Stop Loss Structure

• The stop loss is determined by the appropriate strategy.

Risk Management Framework

• Risk management rules are applied based on the identified market type.

Position Sizing Model

• Position sizing is adjusted based on the identified market type.

Trade Filtering

• Trades are filtered based on the identified market type.

Context Framework

• The Hurst exponent provides the context for the market.

Trade Management Rules

• The trade is managed based on the rules of the appropriate strategy.

Time Rules

• The strategy can be applied at any time.

Setup Classification

• The strength of the setup is determined by the Hurst exponent and the quality of the signal from the appropriate strategy.

Market Selection Criteria

• The strategy can be applied to any market.

Statistical Edge Metrics

• The edge is determined by backtesting the strategy.

Failure Conditions

• The strategy can fail if the Hurst exponent gives a false signal.

Psychological Rules

• The main challenge is to be able to switch between trend-following and mean-reverting strategies.

Advanced Components

• A variety of methods can be used to calculate the Hurst exponent, such as the rescaled range (R/S) analysis.

Location

• The strategy can be applied to any market.