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Re: Band2 Study



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Mark, O.K, I understand. Will watch this. What threw me for a loop was that my own
channel breakout system for big caps stopped working because of the drop in volume
of the MARKET (after the big drops in markets about a month ago, when institutions
got scared off, block trades started to drop). Nothing to do with prices being
above/below/between widely followed moving averages (eg. 50/200). But I guess
that's one of the advantages for those who trade futures (better liquidity and a
range of commodities etc. to trade not all subject to dominant cycles of sentiment
in the big contracts/indexes that infect other markets/commodities).

Mark Brown wrote:

> Hello  Dirk,
>
> I think for strictly mechanical trading system channel breakouts, with
> filtering are fine.  However the reason for this study was not to have
> a  mechanical  system.   But  rather  it was created so that I could
> better  statistically  trade  selling options on both sides of the
> markets.    This  study  helped me have a statistical understanding of
> what   the  odds  were  in my favor or against me. How much heat would I
> have   to endure, if I was wrong.  And if I was correct how long could
> I  expect  it  to  last?   While  this  is  not a system, I do believe
> over time you will learn to respect it, if you watch it.
>
> DdV> Do channel breakout systems perform better or worse depending on volume?
>
> Of  course a perfect world average volume of the best for the entry of
> channel  breakout  system.   With  ever  increasing  volume as a trade
> progresses  in  your  direction.   More  often  than  not,  enthusiasm
> leaves   shortly   after the breakout.  Leaving hopeful traders out to
> dry.
>
> DdV> My own channel breakout sys that I use on big caps breaks down when avg
> DdV> volume on NYSE falls below its 50 day moving average, and esp below 200
> DdV> day moving avg (as per right now). This might apply to SPY (ie. the
> DdV> exchange traded fund for SP500) right NOW but not on AVERAGE. This happens
> DdV>  to  my channel breakout system even though it trades short quite often as
> DdV> well.
>
> It  sounds as though you have understanding of market participation in
> the pitfalls of the system which is based strictly on price movement.
>
> --
> Best regards,
>   Mark Brown                        mailto:markbrown@xxxxxxxxxxxxx