Summary

We have examined a few regime methodologies that will help you pick up on signals that a market is going up or down. Regime breakouts and moving average crossovers are staples in the arsenal of trend-following traders. Duration is as much a function of style as what the market happens to reward. Then, we introduced the floor/ceiling methodology. This regime definition method works on absolute and relative series. It is symmetrical and above all more stable than any other methodology. It therefore supersedes everything else.

However, regime definition methodologies are not mutually exclusive. For example, the floor/ceiling method could be used to determine the direction of trades, long or short. Then, regime breakout could be used to enter after consolidation or sideways markets. Finally, the moving average crossover could be used to exit positions.

Having a signal is one thing. Turning it into a profitable strategy with a robust statistical edge is another. There is...