Example of Finding Edge

Note: While this answers the theoretical idea/question that was given, we do not see this as a “ready to run” strategy. This is an example of finding an edge but does not complete the steps of creating an effective trading plan.

The steps for a full trading plan has several other considerations, including:

  • Sizing for each
  • Potential filtering for when to trade or not
  • Hedging opportunities that don’t add too many transaction costs
  • Stress testing for outsized movements not in the sample period
  • Etc.