New edge proposed: overnight_range_breakout_fade_with_volume_confirmation — E8 Intelligence Research

{ "name": "overnight_range_breakout_fade_with_volume_confirmation", "source": "Market profile / auction market theory (Steidlmayer, Dalton); commonly cited in intraday mean-reversion literature", "type": "filter_flag", "rule": "Only take a short if the current bar has closed above the overnight high (defined as the highest high from 00:00 to 09:00 UTC) by at least 0.25 ATR, and the current bar's volume is less than the 20-bar average volume, and the prior bar closed below the overnight high.", "pseudocode": "if bar.time >= 09:00 UTC and prev_bar.close < overnight_high and bar.close > overnight_high + 0.25 * ATR and bar.volume < SMA(volume, 20)[1] then flag = 1 else flag = 0", "why_it_works": "Volume dry-up on an overnight-range breakout suggests lack of conviction, increasing probability of a failed breakout and reversion back inside the range." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com