Regime detection in seconds, not minutes
Posted: Sat Oct 31, 2026 2:07 pm
Regime detection in seconds, not minutes
Indicators like ADX take a while to react. By the time they confirm a trend, much of it is over. For scalping, regime detection needs to be faster.
Alternatives use the data available at tick scale. Tick rate shows activity. The ratio of net price change to total distance traveled over the last minute, sometimes called the efficiency ratio, shows whether movement was directional or choppy. A value near one means a clean trend. Near zero means chop.
Autocorrelation of short-term returns hints at momentum or mean reversion. Spread behavior adds another dimension: widening spreads often accompany directional pressure.
The risk is overfitting. Regime labels are imprecise, and a model that switches too eagerly produces whipsaws.
Testing out of sample is essential. The regime detector should help in data it wasn't tuned on, otherwise it's decoration.
Trending or ranging in the last minute: which measure decides it?
Indicators like ADX take a while to react. By the time they confirm a trend, much of it is over. For scalping, regime detection needs to be faster.
Alternatives use the data available at tick scale. Tick rate shows activity. The ratio of net price change to total distance traveled over the last minute, sometimes called the efficiency ratio, shows whether movement was directional or choppy. A value near one means a clean trend. Near zero means chop.
Autocorrelation of short-term returns hints at momentum or mean reversion. Spread behavior adds another dimension: widening spreads often accompany directional pressure.
The risk is overfitting. Regime labels are imprecise, and a model that switches too eagerly produces whipsaws.
Testing out of sample is essential. The regime detector should help in data it wasn't tuned on, otherwise it's decoration.
Trending or ranging in the last minute: which measure decides it?