SQN and Harmonic Rotation Study for the ES (S&P500 E-mini)

I wanted to take a look and see if there was any correlation between the way Dr. Van Tharp categorizes market types using SQN and ATR%, and the size of Harmonic Rotations. Basically, Harmonic rotations can show how much an instrument is willing to trend in 1 direction, so I was curious to see if particular market types offer larger rotations over others.

What I did was write a C# strategy in NinjaTrader to output the same Harmonic Rotations I had in my Harmonic Rotation study along with the SQN(100) and ATR%(14) data. This allowed me to find the average size for each market type.

Here are the results for the ES

  Strong Bear Bear Neutral Bull Strong Bull
All 2.846317416 1.909791 1.716081 1.63413 1.611572
Quiet #DIV/0! #DIV/0! 1.808349 1.60596 1.535091
Normal #DIV/0! 1.669079 1.658002 1.62139 1.612134
Volatile 2.54752884 1.911458 1.758945 1.687882 1.625456
Very Volatile 2.915716612 2.044508 1.764233 #DIV/0! #DIV/0!

Note: The #DIV/0! just means that there were no days with the criteria for that particular market type.

As we might expect, the more bearish the market is, the more likely we will have larger harmonic rotations. And also as the market becomes more volatile, which is more likely the more bearish the market is, the larger the rotation is as well.

What is also interesting is the large increase in the average rotation from the Bear to the Strong Bear market types. It’s quite clear that the rotations are much larger and thus you are statistically better off trading to the downside.

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