Jun

23

I wonder if there is a point in time at which it becomes too late (unprofitable) to go against in markets. This is clearly under a time bound, like the day, the week, the month etc.

This needs to be analysed in two frameworks. Firstly, the road to some form of answer is different between 'bounded' futures markets and markets that trade in the fashion of spot currency markets whose short term higher number central moments are often very extreme.

Secondly, my work indicates that the 'answer' is not linear. It will not be a specific time of day. The proponents of the arc-sine work have some measure of empirical evidence on their side for the close as the best guess, but it is a blunt tool in this context.

A fascinating case study is the EURUSD spot market today- down almost every hour since London midnight with the total move of relevant statistical 'weight'.

In other words, you should study if a specific time and magnitude combination negates subsequent reversal strategies for the time period under consideration (regardless of the strategy's historical efficacy).

I'm starting to sweat as the EUR declines as I have a bet with an exceptional trader in the spec list that the EURUSD will trade its 1-1-15 level again before the end of the year. The prize is steak and lobster at The Palm in New York.


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