A momentum setup in a trending market is a different trade from the “same” setup in a chopfest. If your tools do not know which regime they are in, their signals are indistinguishable noise.
Why regimes matter
Markets do not have one personality. They have a handful of recurring moods — trends, chops, calms, crashes — and the same technical setup produces wildly different outcomes in each.
The six regimes OcuBit tracks
1. Low-vol trend
Realised vol in bottom decile. “Boring makes money”. Momentum works. Mean-reversion fades. We upgrade momentum confidence ~15% and downgrade reversion ~20%.
2. High-vol trend
Realised vol in top quartile, directional. News-driven. Momentum works but invalidation levels are wider; we scale positions down ~30%.
3. Chop (range-bound)
Oscillation in a defined range. Fade-the-edge prints. Breakouts fail. We downgrade momentum aggressively (−25%).
4. Chop (expanding)
The dangerous one. Both momentum and mean-reversion print losses. Best play is often no play. We publish roughly 40% of normal volume with “elevated whipsaw risk” tags.
5. Risk-off compression
Vol high and expanding, correlations snapping toward 1. Macro driver visible on calendar. We go conservative across the board.
6. Dislocation
Liquidity vacuum, flash crash, unscheduled intervention. The engine suspends all signal publication 15–60 minutes.
How the switch happens
Three detectors run continuously on 5m, 1h, 1d. A regime switch is called when at least two agree, with a 20-minute confirmation window.
Signal quality is regime-conditional
Our momentum precision in Chop-Expanding regimes has sat around 48% for six months — which is why we barely publish signals there.
What you should do with this
- Glance at the current regime before taking any signal.
- If the regime is one you dislike, pass on everything.
- Review regime at the start and end of each week.
What we are not doing
We do not try to forecast regime switches. The research on that is unimpressive. We detect them as soon as the data supports it and tell you.
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