A Mechanical Strategy Journal

[waveslider]

Dogpile,
I am getting different results with your strategy. What is the max bars the strategy will see?

[waveslider]

ok nevermind. I see you changed the code. I notice it works best when the market is not trending (majority of the time). That's a good way to operate if you can cut losses in the trends.

[Dogpile]

I am using the minimum -- 6 bars -- since it only needs to reference the highest high and lowest low of last 5 bars. yah, I added the volume code just to only create signals on an active contract.

another way to cross-check it is do it is to confirm it using the ETFs since they don't rollover (SPY, QQQQ, IWM) and the futures are based on these ETF's as the underlying.

Range expansion off opening price seems to be very valid idea for the long side. The short-side is tougher -- it is profitable and adds to returns but you can take a ton of heat along the way -- this could be because in a multi-year bull market -- or have something to do with just market dynamics where market falls fast and rises in relentless fashion (take a lot of pain but rewarded occassionally in a big way on short side).

Breaking down the strategy results you can see the effect the short-side drawdowns have on the overall result. It is still profitable but painful at times.

[Dogpile]

<<That's a good way to operate if you can cut losses in the trends.>>

waveslide, I can see in the strategy orders that some of the orders fly right in the face of a few core principles I abide by. ie, tomorrow, it looks like we will very likely get short based on the strategy rules. I would not want to get short BELOW the opening price given the set-up going in. Above the open might be a short tomorrow -- but I do not want to short on weakness with all the likely residual momentum in the market. I have noticed this type of order --- in the face of a potential breakaway gap --- being a problem for this strategy. So already I can see that this short-strategy as it is written just isn't right for me. Perhaps I will only take the longs and rely on my own existing short-scalp strategies to make money on the short side.

The long-side strategy looks good. I actually went long RUS today and thought of keeping 1 on in line with this strategy. I wimped out and scratched the order -- big mistake.

[Dogpile]

Plugged formula into a 'ShowMe' function in Tradestation Radarscreen to automate the calculations and can post them after the opening price prints.

Today we will get 'sell-long and go-short' signals at the following prices:

NQZ07.D Short 4 Contracts on Sell-Stop @ 2066.75
ER2Z07.D Short 2 Contract on Sell-Stop @ 819.90

note:
ESZ07.D - Already short and no buy signal can trigger today

(since already long, the NQ and ER2 trades are actually 'Stop And Reverse' trades whereby you would short 4 NQ and 2 ER2 -- first to sell long, then to go short)
-------------

I really don't like these potential short orders -- not to say there isn't downside, there will likely be a good flush down today or tomorrow... -- its just that we have no prospect of covering these orders until we close low in the 5-day range -- which won't be for a while most likely --- seems like a tough trade but I will follow them here anyway. Meanshile, I will be working and thinking on some filters for the short-side code. Have a couple of ideas -- need to work out the code for them.

[waveslider]

FWIW, though there is a lot of emotion in the market right now, there is a good case for calling this market a ranging one. For one, the major down move in August retraced the entire up leg that Mar-July achieved.
This is the kind of thing the system doesn't see - it is stupid, it just does the same thing over and over again. Still it makes money! That's because it is often doing the contrarian action. Contrarian actions make money, but it takes balls to be a contrarian - and you have to have a good strategy.

[waveslider]

"The book uses a 9-day range for its triggers. I prefer a 5-day range."

Why 5? The nine looks smoother. Coincidentally, Gann and Demark seem attracted to the number nine (the beatles too).

[Dogpile]

why a 5?

good question. I feel like a 5-day buy system will catch those hard 1-2 day pullback sell-flushes that occur during an uptrend.

5 is a fib number. I played around with 8 too (another fib number).

9-days works well too. 5 works well. 8 works well. the concept is just plain powerful on the long side (range expansion off opening price).

my preference on looking at all of them was that following the 5-day lines up best with my existing strategies. My current strategies are all about 'going-with' the intraday trend but being more careful if it coincides with a 'daily trend'. I believe in choppy markets if looking at them on a 2-4 day basis... but those 6-8 day consecutive moves do happen so I have built-in rules so I don't get run-over when those do occur.

the strategy just needs the recent close to be closer to the bottom of the range than the top of the range -- so it fits in with my 3-5 day buying/selling cycle thesis. it doesn't have to make a 5-day low or high, it just has to be closer to that side.

I am just trialing the 5-day --- I have also thought about doing some combination like:
long 9-day ES
long 8-day NQ
long 5-day ER2

and leaving the short-selling to my own scalping -- I do extremely well on the short side as is...

your comments are greatly appreciated.

[Dogpile]

well, new short orders triggered (NQ & ER2) so short everything now... tough location IMO to short but I will see this through...

Existing:
Short 1 ESZ07.D
Short 2 NQZ07.D
Short 1 ER2Z07.D

[bh_trade]

The shorts triggered today always struggled. Too many short coverers and wannabe longs providing bidside support into the partial fill of today's opening gap.

Curious, are you paper trading these or actual $$?