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I was curious to know if there was any pattern to what happens after
the market has dropped by at least 1% for 3 consecutive days in the
past - to see if there is a buying or shorting opportunity
(statistically).
I downloaded all daily data back to the 20's for the DOW from Yahoo
and put some code together (below). In some backtests and
optimizations (with some code that needs to be modified slightly) it
appears that if you buy on open on Monday and hold about 86 days you
can make a nice gain.
I'm having one problem w/ the code. I'm optimizing for the # of
days, which seems to be holding 86 days as the best scenario, but
when I run the backtest for 86 days I get 3 or 4 sell signals that
don't conform to 86 days. I assume that my sell signal is getting
confused w/ multiple buy signals or something else is going on but I
havn't been able to figure out why it isn't working. What I'd want
to do is have it buy after 3 consecutive days down more than 1% and
then sell x days later (in this case whichever ends up optimized).
If someone can help tell me how to fix the sell signal I'd be happy
to post the final results.
Here is the code:
PositionSize = 1000;
C1 = Ref(C,-1);
C2 = Ref(C,-2);
C3 = Ref(C,-3);
Holdtime = Optimize("hold time",86,1,180,1);
dropamt = .01;
bigdrop = (C1-C)/C1;
bigdrop2 = (C2-C1)/C2;
bigdrop3 = (C3-C2)/C3;
threedays = (bigdrop >= dropamt) AND (bigdrop2 >= dropamt) AND
bigdrop3 >= dropamt);
Buy = threedays;
Sell = Ref(Buy,-Holdtime);
Short = False;
Cover = False;
AddColumn(Buy,"buy",3.3);
AddColumn(bigdrop,"bd",3.3);
AddColumn(bigdrop2,"bd2",3.3);
AddColumn(bigdrop3,"bd3",3.3);
AddColumn(threedays,"threedays",3);
Filter = Buy;
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