I am a coder by day and trader by night! Coding is my day job. I am fully aware that only having a job will not allow me to provide for my family and myself consistently in the long run. This is because most of the western societies are setup in a way to be more and more disadvantageous towards the working middle class. I do not need to be a billionaire to be happy, but our society is becoming more and more binary. It seems that one can either be rich or poor, in which case I opt to be rich, or at least hedge myself against being poor. Trading and investing are my hedge against this trend.
In this article, I will systematically investigate the tendency of different Forex pairs to either trend or revert to the mean. I will do so by backtesting a simple trend-following strategy. (Code available on Github. See the end of this article.)
“The trend is your friend.”, is a very well known trading adage. Another thing you read a lot in trading books, blogs, etc. is that the market only trends 20, 30, 40, xx% of the time.
I was wondering how these ideas relate to the Forex markets.
I asked myself the following questions:
Do all forex pairs have the same trending tendency?Are there any pairs that are actually generally more mean-reverting in nature?And which Forex Pairs are generally trending and which ones tend to revert to mean?
The reason I was asking myself these questions, is because I have experienced different behaviors between forex pairs while trading the same strategy.
Some pairs just keep going in the direction of my trades, while others seem to turn around more quic…