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I have a few systems like that. It will use the highest high/lowest
low of the past n days, where n is optimised for, and then if that
level is broken with a certain percent, also optimised for, you
enter a directional trade in that direction or in the opposite
direction, also optimised. Depending on how many parameters you
fix beforehand you can get a great variety of systems and you can
add more. We try to keep things simple, but one of these models
do ok with some stuff.
I talked to a trader today and we will test a system where we simply
count the number of ups/downs and what probability you have of
another up/down following on that. This is very simplistic, but I
know some people who trade with this type of system and will judge
it by the results.
Anyhow, just thoughts really. Another one, by just reversing your
suggestion, you get a stop loss scenario. Suppose you are in
already and get the benefit of the first leg of the V, now you need
to get out and is the first move down just a breather or the second
leg of the V. If you know that a 'breather' is normally less than
say 3%, and that a new trends develops at 3% but you are sure you
have a new trend at say 5%, then put a stop loss (from the peak of
the V) at 3% and enter in the new direction at 5%.
Still you have lag, the market needs to move at least 3% before
you exit the PREVIOUS position, and another 5% before you enter the
next one, so you have lag, this time in the magnitude of the movement
rather than in number of days. Maybe a good system will combine them,
thus if the market moves 3% in two days, exit, but if it moves 3% in
10 days, linger on a bit. Most moving average/trend indicator stuff
will work the other way, it will remain in place if the market moves
say 7% in 1 day, but will exit if it gradually moves down say 1% in
ten days. Just the way smoothing techniques work..... Is this the
way markets work? If the Dow say moves up good and then for ten
days goes nowhere, do you exit? If the Dow moves up good and then
for one day drops big time, do you then exit? Which one is the
better indicator? Any trend following one will prefer the first, but
we are looking for the latter since we see V moves.....
Regards
MG Ferreira
TsaTsa EOD Programmer and trading model builder
http://tsatsaeod.ferra4models.com
http://www.ferra4models.com
--- In equismetastock@xxxxxxxxxxxxxxx, Dominick <Dom2000@xxxx> wrote:
> MG:
>
> One method may be to use a Peak/Trough formula and enter a reaction
> percentage before the first leg of the V
> is drawn. For ex a reaction,(up or down), of 3% from the high or
low.
> Then create a formula that counts the total times
> there was a 3% move and how many of that total move 10% or more.
>
> If 65% of the time there was a 3% reaction the stock continued to
10% or
> more then you know the odds are in your
> favor catching part of the move.
>
> Just a thought,
>
> dom
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