Thursday, August 07, 2008

10 Day Low, Double Exit

I continue to tinker with the Buy the 10 Day Low System, and have found several ways to increase overall return wih no added risk. The simplest way is to add multiple exit triggers. . .in this case the original MA cross is now supplemented with a % R overbought exit trigger as an either/or command.
TS 2000i code shown below:

Inputs: PercentRLen(7), Len1(8), Len2(19), Overbought(95);
If Close = LowestFC(Close, Len1)
Then Buy This Bar at Close;
If Close crosses Above Average(close,Len2)
Or PercentR(PercentRLen) > OverBought
Then Exitlong This Bar at Close;

Total number of trades increases7%, while trade gain over the 5 year test period increases 20%. Drawdown exposure remains the same.
This is just an incremental adjustment to the 1o day low system. There are substantial refinements to the system's risk management that can be added without comprising the elegant simplicity of the concept and I'll review some of these in the system updates next week, including a linear regression stop inspired by a comment from Sysin.
Corey has a GREAT post today updating the success of various DIA gap fades.
He updates the database on a monthly basis and provides a thought-provoking array of performance data that's adaptable as a risk/management tool.
Definitely worth a close look.


sysin3 said...

what, no golden goose ? doggone, that's disappointing ;-)

i'm mostly playing around with intraday stuff, trying to catch some 1/4s or 1/2s. so far, not much that looks interesting.

btw, LinearRegAngle(close, len) seems handier than the Slope (just bigger numbers, but should do approximately the same thing)

Unknown said...

I was browsing the web and came across the 10 day trading system but as sheepish as I feel to say this I cannot quite follow it. I am interested in looking into the 10 low trading aspect but I do not understand what you would use as a base day...? If you could dumb down even more how to calculate the 10 day low that would be great!

bzbtrader said...

TradeStation code does all the calculating and it's really all in the lead line:
If Close = LowestFC(Close, Len1)
where Len1 is a variable input.
Basically, we optimize Len1 to determine the best retracement value in days FOR THE IWM. As I try to stress in the blog, each ETF and/or index has is own signature cycle and values for IWM don't necessarily apply to the Qs, SPY or XLF, etc.. The base day is determined by TS when it finds a sequence of lower lows over period Len1. There are a whole slug of these LowestFC and HighestFC studies in the archives . . too many for me to list, but if you run a couple archives searches they should pop up.
Hope that helps.