Using AutoCorrelation to Find Trading Signals
How to Use AutoCorrelation to Trade the Markets
Autocorrelation is the variable’s linear correlation with its own lagged values. Insights may be gotten from autocorrelation that help understand the market’s properties. For example, persistent positive autocorrelation generally happens in trending markets while negative autocorrelation generally happens in ranging markets.
For a detailed and thorough collection of contrarian trading strategies, you can check out my book. The book features a huge number of classic and modern techniques as it dwelves into the realm of technical analysis with different trading strategies. The book comes with its own GitHub.
The Intuition of the Trading Signals
Correlation is the degree of linear association between two variables. It is a number bounded between -1.00 and 1.00 with the following interpretations:
- A value of 1.00 represents a perfectly positive correlation which means that the two variables move in the same…
