Greetings.
I have been looking into the methods by which one can determine the type of market that currently prevails in a given currency pair between:
[ul]
[li]Bull Normal
[/li][li]Bull Volatile
[/li][li]Bear Normal
[/li][li]Bear Volatile
[/li][li]Sideways Quiet
[/li][li]Sideways Volatile
[/li][/ul]
I would like to be able to determine what type of market the pair is currently in and the strength of this type; so that I can deploy the most appropriate trading strategy for it, or search multiple pairs for the type suitable to a single approach.
I have looked at some useful literature on the subject and would like to ask for more input or ideas on how to classify the type and strength of the market conditions.
Ideally the market type determinants/classifiers would have to be mathematically describable so they can be used in or identified in a visually testable way by an EA e.g. a strong bull normal might have a high 15 min ATR, particular volume, volatility, bollinger band and other quantifiable characteristics.
[B]Goals[/B]
I spoke (argued) with a few guys/gals on the forum about trading approach and in the process learnt quite a lot as well as reaffirmed some old ideas. What is clear was the need for sustainable +Ve EV by trading when the strike rate is consistently above the equilibrium value. I prefer to take the algorithmic approach and have noticed the shifting or transient nature of the performance of my EAs which I would attribute to trading in suitable market conditions for sustainable +EV (right market conditions for my approach) and -EV conditions where I might be trending trading a weak sideways market more suitable for scalping.
So I would like to build a more comprehensive multi-strategy trading plan around these principles:
[ul]
[li]
[/li][li]I should have an EA than can classify the current market conditions with accuracy.
[/li][li]I should be able to use this EA to work out the probability of one market condition changing to another, the average duration of those conditions, the lag time for my classifier
[/li][li]I have an EA based on the Stochastic Oscillator to track the performance (Strike Rate) of any given trading EA over a defined period.
[/li][li]I should be able to superimpose the performance measure by the Stochastic EA to the classified market type to identify the market conditions in which my trading EA works best: correlate the likely strike rate to the market conditions.
[/li][li]I should use the market identification, likely performance estimates and market conditions shifting probabilities to predicatively switch from one trading strategy to another.
[/li][/ul]
Please advise.