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On Oct 26, 12:00pm, Walt Downs wrote:
> Subject: Re: Short Term Trade set-ups
>
> So, I track ALL bars that, as an example, have an open very near the
> day's low, and a close very near the day's high.
Conors and Rashke look at this pattern in quite a bit of detail,
in their book "Street Smarts". They quote a study by Morris,
and include a lot of tables on various commodities. They indicate
that a high percentage of the time, that the market reverses. When
I tried building a mechanical system off this, however, using a
continuous contract, I couldn't come up with anything that showed
a convincing profit.
different study: try the following - look for N-day "narrow days",
and vary N from say 1 to 30. Then set up a system that buys the
breakout of the previous day's high/low, if the previous day
was an N-day narrow day (had the narrowest true range in the
past N days). If the breakout level is hit, then close the
position at the end of the day. If both the high and low are
teken out, then mark that down as a loss to the tune of the
sell stop (previous N-day narrow day low) minus the buy stop
(previous N-day narrow day high). When I did this on a continuous
S&P contract, I had to crank N up to 20/so before the system started
showing a profit. Those N=20 narrow days don't come around too often,
so there's no danger of overtrading this system. :). One reason
that I think it works is that the N=20 narrow days obviously set
a tight stop on the next day's action, so there's a strong degree
of money-management involved. One advantage of this system is
that the orders can be placed ahead of the next day's open, and
with the use of OCO (one cancels the other), and "if done" orders,
this system can be set up to go on "automatic" the next day. Given
the low frequency of signals however, you'd probably need to trade
a dozen markets or so, just to get decent diversification and turn
over on your money.
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| Gary Funck, Intrepid Technology, gary@xxxxxxxxxxxx, (650) 964-8135
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