trading-edge

Before moving to trading bots, I will summarize here about the Indicators used in "Cross-sectional Momentum" and "Mean Reversion" mentioned in other casts.

Cross-sectional Momentum:

This strategy aims to identify assets with strong momentum, i.e., those that have shown superior performance in the recent past. To do this, indicators are used that measure the strength and direction of the price trend. Some of the most common are:

Ind 1. Past performance: The asset's return over a given period, e.g., the last 30 days, is calculated. The assets with the highest returns are selected, assuming that they will continue their upward trajectory.

Why? It is a simple and direct indicator that reflects the strength of momentum.

Ind 2. Trading volume: High volume can indicate strong interest in the asset and confirm the validity of the trend.

Why? Volume acts as a measure of the conviction behind the price movement.

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Continue here Indicators used in "Cross-sectional Momentum":

Ind 3. Relative Strength Index (RSI): Measures the magnitude of recent price changes to assess overbought or oversold conditions in the price of an asset. In a momentum strategy, assets with high RSI are sought, which indicates a strong upward trend.

Why? It helps to identify assets with strong momentum that have not yet reached an overbought zone.

Ind 4. Moving Average Convergence Divergence (MACD): Shows the relationship between two moving averages of the price. A bullish crossover of the MACD may indicate the start of an uptrend.

Why? It helps to identify changes in momentum direction.