Yenmusubi AI Development Story Episode 2 — Why "Buy the Dip" (Dispersion and Regression)
Last time, I talked about three yen crosses moving like family, with moments whenone of them lags behindfor a brief moment. This time is the continuation—Why buy that one lagging lone wheel. The keywords are “dispersion” and “reversion.”
USDJPY, GBPJPY, EURJPY all share the yen as the common axis. When the yen is bought, they fall together; when the yen is sold, they rise together. So, in the long run,the three move in similar directions.
However, in short timeframes, due to some trigger, one can move more slowly. This is “dispersion. And the dispersed gap willeventually close and return to the original alignment— this is “reversion. The lagging lone wheel will try to catch up with its mates. That is the idea behind this EA.
Here is one adjustment. Each instrument has its own typical price movement. The same “30 pips delay” can be a small error for a volatile instrument and a large gap for a quiet one.Sticking with pips won’t allow fair comparison.
So, we adjust by how many multiples of the instrument’s usual range (ATR) the lag is.The lag is normalized by ATR. Instruments that lag by more than 1.0 ATR compared to their peers become buy candidates.
I also considered the opposite—“sell the leading stock” of the dispersion. However, tests showed thatthe sellers were at a disadvantage no matter how they configured it. The lagged “buyback” side was more stable to capture. So this EA isbuy-only. Selling remains as an experimental feature and is off by default. If a strategy didn’t win in tests, it wasn’t adopted. This is another judgment call.
To be honest, I’ll also acknowledge weaknesses. This method is tough whenthree pairs all decline during a broad yen appreciation. When everyone sinks, the lagging lone wheel sinks too, and reversion is slow to arrive. A structural weakness of a method based on reversion.
This weakness leads to the next theme—“Why remove stop-loss?”—the most important and also the most precarious choice.
Enmusubi AI is not on sale yet. From now on,a daily demonstration in the EA Verification Labwill run to reveal both strengths and weaknesses as it is refined. Please watch the process toward completion together with us.
※This article is for information purposes only and is not investment solicitation. The operating results published are past performance and do not guarantee future profits. FX/CFD trading carries risks. Please make investment decisions at your own responsibility.