|
PureBytes Links
Trading Reference Links
|
I'm convinced that complexity is not required at the core of a
profitable trading system. A mechanical system I recently designed has
Gann swing trading principles at its core. It is supplemented with (1) a
trend determination algorithm based on pattern-recognition and (2) a
proprietary exit strategy rooted in Gann swing theory.
Initial system tests were over various periods from 1962 to early 1999
with trade accuracy ranging from about 70% to 90% depending on the
period tested, the reward/risk ratio accepted at the time of the trade,
and entry-exit techniques used. The resulting profit/loss ratio after
several hundred trades ranged from about 2:1 to 5:1 depending on the
above factors. Recent real-time trading results have demonstrated
similar performance. A stunning discovery found in this research was
that trades with a better reward/risk ratio also exhibited greater
accuracy along with expected larger winning trades and smaller losing
trades.
(NOTE: A summary of recent results from Sept 15 to Dec 14 is included at
the end of this post.)
The basic Gann trading principle used at the core of the system is
described in Figure 1 (attached). This figure and related discussion
assume a Long position. The inverse is true for Shorting.
Allow me to summarize basic Gann's swing trading principles used in the
system:
· AB = CD in Price
· AB = CD in Time
· AB > BC in Price
· D > B (in price) confirms upward trend
Gann said that markets generally move in "balance". After rally (AB) and
correction (BC), another rally (CD) of a similar nature to AB can be
expected…especially when a long-term uptrend has been established and
the high point of AB has been violated by Point D. Point B represents
resistance…which often becomes support for a likely price move to Point
D after Point B is violated.
According to Gann's theory, the longer-term uptrend which began at ABC
is likely to continue only after Point B is significantly violated in
price. Note that Gann placed high importance on "time" stating that
significant price moves cannot occur until the proper time for such
moves. The system takes both price and time factors into consideration
before AND after trades are entered. Trades that reach a target "too
quickly" are likely to stall for a while in order to preserve market
balance. Trades that fail to reach a target at the expected time reflect
an out-of-balance situation. The system recognizes this, and attempts to
exit such trades before a sharp reversal occurs.
I should note that in designing this system, I went substantially beyond
Gann swing trading principles in two areas:
o Use of a proprietary exit strategy based on whether an entered trade
is "on target"
o Use of an proprietary pattern-recognition algorithm to forecast a
change in the major trend (Point A) well in advance of any trend change
detected from Gann swing trading analysis
In our recent real-time tests, the following procedure was followed:
1. A proprietary algorithm based on price pattern was used to determine
when Point A is clearly established, and when an uptrend has likely
begun.
2. The system waits for the price pattern ABC to develop according to
Gann swing trading theory.
3. If Point B is then violated in a timely manner, the system recommends
entering the trade on a Stop at the time and price that Point B is
violated.
4. The system exits the trade when either the Real Profit Target or
Stop-Loss Point is touched. The system attempts to exit at a profit
BEFORE the Theoretical Profit Target at point D is reached. This is
because prices just short of Point D are reached a greater percentage of
the time. (NOTE: I have also tried a trailing stop to protect profitsFrom ???@??? Tue Dec 21 09:30:37 1999
Return-Path: <listmanager@xxxxxxxxxxxxxxx>
Received: from mail.thetrellis.net ([208.179.56.11])
by purebytes.com (8.8.7/8.8.7) with SMTP id CAA07650
for <neal@xxxxxxxxxxxxx>; Tue, 21 Dec 1999 02:45:03 -0800
Received: from REALTRADERS.COM
([208.179.56.198])
by mail.thetrellis.net; Tue, 21 Dec 1999 00:04:26 -0800
Received: from esrelay002.caissedesdepots.fr by realtraders.com
with SMTP (MDaemon.v2.8.5.0.R)
for <realtraders@xxxxxxxxxxxxxxx>; Tue, 21 Dec 1999 00:00:27 +0000
Received: from esmailfed2.serv.cdc.fr (esmailfed2 [158.156.1.207])
by esrelay002.caissedesdepots.fr (8.8.8+Sun/8.8.8) with ESMTP id IAA19417;
Tue, 21 Dec 1999 08:56:10 +0100 (MET)
Received: from cmi.cdc.fr (localhost [127.0.0.1])
by esmailfed2.serv.cdc.fr (8.8.8/8.8.8) with ESMTP id JAA28504;
Tue, 21 Dec 1999 09:03:15 +0100 (MET)
Posted-Date: Tue, 21 Dec 1999 09:03:15 +0100 (MET)
Received: from eiche.fkt.cmi.net. by cmi.cdc.fr (8.8.8+Sun/SMI-SVR4)
id JAA04082; Tue, 21 Dec 1999 09:00:20 +0100 (MET)
Received: from cdc-gmbh.de by eiche.fkt.cmi.net. (8.8.8+Sun/SMI-SVR4)
id JAA07408; Tue, 21 Dec 1999 09:00:18 +0100 (MET)
Message-ID: <385F3319.51D8F4E7@xxxxxxxxxxx>
Date: Tue, 21 Dec 1999 08:58:17 +0100
From: Gwenael Gautier <ggautier@xxxxxxxxxxx>
Organization: CDC Marches FKT
X-Mailer: Mozilla 4.7 [en] (WinNT; I)
X-Accept-Language: en
MIME-Version: 1.0
To: <realtraders@xxxxxxxxxxxxxxx>
CC: realtraders@xxxxxxxxxxxxxxx
Subject: [RT] Re: Crash Index at minus 10 Reading
References: <0.5193ec49.258fc95d@xxxxxxx>
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: 7bit
X-MDaemon-Deliver-To: realtraders@xxxxxxxxxxxxxxx
X-Return-Path: ggautier@xxxxxxxxxxx
Sender: listmanager@xxxxxxxxxxxxxxx
X-MDMailing-List: realtraders@xxxxxxxxxxxxxxx
X-MDSend-Notifications-To: listmanager@xxxxxxxxxxxxxxx
Reply-To: ggautier@xxxxxxxxxxx
Status:
This summer it was at -10 also. There has been a crash without a -10 reading
before so he claims, but what is the likeliness of having actually a crash
after a -10. I presume it is over 50% chances but that doesn't mean a crash.
BTW, what's a "crash" by his definition?
The strange thing is that indeed the indices scream for corrections, yet on the
individual stocks I am hard pressed to say which ones I should get rid of. None
of mine at least show any sign of going south significantly. So maybe I'll stay
in the stocks and ride it out while going short the index for a while???
Just food for thought.
Gwenn
Jpilleafe@xxxxxxx wrote:
> posted by Jim Pilliod
>
> Crash Index at -10 threshold level.
> <A HREF="http://www.wwfn.com/crashupdate.html";>The U.S. Stock Market Crash
> Index</A>
|