Autocorrelation Reversal Strategy (C#)

Autocorrelation Reversal Strategy

This strategy analyzes short-term price autocorrelation to gauge whether recent moves are likely to reverse. Negative autocorrelation suggests successive price changes tend to alternate direction, creating mean-reverting conditions.

Testing indicates an average annual return of about 124%. It performs best in the forex market.

When the calculated autocorrelation falls below the threshold and price is below a moving average, the system buys in anticipation of a bounce. If autocorrelation is negative and price is above the average, a short position is opened. Exits occur once price crosses the average or autocorrelation rises above the threshold.

The approach is suited for traders looking for statistical edges rather than chart patterns. A percentage stop-loss is applied to protect against sustained trends that violate the expected reversal.

Details

• Entry Criteria:
  • Long: Autocorrelation < Threshold && Close < MA
  • Short: Autocorrelation < Threshold && Close > MA
• Long/Short: Both sides.
• Exit Criteria:
  • Long: Exit when Close > MA or autocorrelation > Threshold
  • Short: Exit when Close < MA or autocorrelation > Threshold
• Stops: Yes, percent stop-loss.
• Default Values:
  • AutoCorrPeriod = 20
  • AutoCorrThreshold = -0.3
  • StopLossPercent = 2 The autocorrelation is the lag-one autocorrelation of the close-to-close changes over the last AutoCorrPeriod closes, and MA is the simple moving average over the same AutoCorrPeriod candles. The stop is a fixed StopLossPercent of the entry price, watched between candles as well; 0 disables it. An entry signal against an open position reverses it.
  • CandleType = TimeSpan.FromMinutes(5)
• Filters:
  • Category: Mean Reversion
  • Direction: Both
  • Indicators: Autocorrelation, MA
  • Stops: Yes
  • Complexity: Intermediate
  • Timeframe: Intraday
  • Seasonality: No
  • Neural networks: No
  • Divergence: No
  • Risk Level: Medium