@ayaantrades's reel — transcript & breakdown

The video starts by stating the topic of finding a trading edge related to momentum, immediately establishing the subject.

“How to find a trading edge, part two, momentum.”

The speaker introduces the common belief about momentum, setting up the premise that he will challenge.

“The idea everyone believes, what's going to go up, keeps going up, ride the trend.”

He explains how he tested this belief using a specific tool and a broad range of holding times.

“So I actually tested it with the exact same tool from part one, except there's one change. Instead of checking one bar ahead, I checked every holding time I could fit in my data, five minutes out to 60 days, 12 of them.”

The speaker reveals the results of his testing, showing that there is no momentum edge and, in some cases, mean reversion.

“The left side is intraday. Each dot asks the exact same question. If it went up over the last 30 minutes, does it keep going for the next 30? Positive means the trend continues, negative means it reverses, and they're all on the line. Nothing gets past minus 2.3. That's not the edge weakening, but that's just pure noise. 150,000 samples per dot, so it's not that I don't have enough data, it's just not there, there's no edge. It's the same thing on the right, and this is the part I didn't expect. Every single horizon is negative. One day, minus 0.195 days, minus 0.12, ten days, minus 0.09. Negative means reversal. So on this market, over this window, at these holding times, there's no momentum, there's mild mean reversion. And that is the opposite of what everybody's trading.”

He summarizes the findings, emphasizing that a momentum edge requires a multivariate approach, not just single instruments.

“What does this mean exactly? All in all, you cannot have a momentum edge based off of one single instrument or one single security that you're trading. It has to be multivariate across an entire massive matrix of different instruments. And you find actual correlations with that using like PCA or something. You can't just trade Nasdaq futures or ES futures and hope for momentum trades.”