I came across a comment on something the Turtle traders had done, which was to stay out of the market in the next trading period following a 2x size win or loss. Interesting idea. They must have made the following observations for their strategy:
- unusually large winning trades were followed by losing trades (negative serial correlation or mean reversion for big winners)
- unusually large losing trades were often followed by another losing trade (positive serial correlation for large losing trades)
My main strategy is multi-asset so probably doesn’t lend itself as well to a “rule” like this. Interesting thought though. I should do some analysis on the pattern of winners and losers and see whether there is a consistent pattern.
Certainly for a single asset, it is not unusual to see mean-reversion following a ramp up in price.