Wednesday, October 15, 2008

Sell New Highs

In my continuing search for market momentum opportunities, here's a very simple approach that sells daily bars when the close, the low and the high are above the previous day's values.
The time period under investigation is only the last year. Extending the test period back 5 years requires a little tweaking of the hold period and the lookback period for highest values, but still proves robust.
I like the max consecutive losers . . 1 . . and the 82% profitable is a nice risk/reward ratio. Max drawdown is a bit of a concern for this size account, and I'll explore possible ways to scale it back in future posts.
This is the optimization report for a 10 day holding range. Not sure what's magic about 9 days, but that's the number to hit for the past year. Holding this short anywhere from 3 to 9 days pays out a respectable amount. The other lesson to be learned from this little system is that new highs have been followed by extended selloffs, not continued new highs.

TS200i code shown below:

If Close=highestFC(close,1) and Low=highestFC(low,1) and High=highestFC(high,1)
Then Sell This Bar at Close;
If BarsSinceEntry=9 Then ExitShort this bar at close;


Unknown said...

Bob, can you please explain the exit on this for me? When you look at the stats for winning trades it says that the average bars is 4 yet the exit rule stipulates 9 bars. I am missing something here? thanks! keep up the great work, i look forward to reading your blog everyday.

bzbtrader said...

Great catch! Some problems with TS coding on my part. See Thursday's correction with my thank you.