Friday, January 09, 2009

Inside Days

Here's a little study based on an article in the latest Currency Trader magazine. This is another free e-format magazine, and while I seldom trade the currencies, the systems that they profile are often very applicable to the equities markets and HEY!, it's free. The article in question (p.20, January 2009) was produced by the CT staff and looked a couple ways to enhance the performance of a simple inside day system. Basically they added a range filter and a trend filter to temper the drawdowns. I, of course, am never content to just accept these things so I
tested my own variation of the system using a moving average condition to filter the trades in addition to the range filter. If you compare their code with mine you'll also see that I have reversed the threshold signals, keeping with my tendency to "do the opposite" per my earlier Castanza studies. Average holding times are about a week and over the test period the system generated about 1 trade/month. Clearly the short side has wildly outperformed the long side, as reflected in the equity chart and the downtrend that has characterized the markets for the last 14 months. As I have mentioned before, my use of the system would be to confirm other Kit of Part system signals for short term cycle tops and cycle bottoms. This, in turn, guides the daily bias of my daytrading. . . either selling the rallies or buying the dips. . .depending on the direction of short term momentum.

Finally, I hope you checked into the Future I-Trade site I mentioned yesterday. The presentation by 20 year trading veteran Al Brooks is really an eye-opener for daytraders as Al uses no indicators (other than a 20 EMA) to guide his trades. Clearly a unique approach and packed with nuggets of trading wisdom.

TS2000i code for inside day system posted below:

As usual, blogger is not letting post the open code beacuse of the > symbols. The open code is posted as comment #1 for you cut and pasters.

1 comment:

bzbtrader said...

Inputs: Len1(4), Len2(4), trendlen(30), threshold(.2), trendlen2(30),threshold2(.4);

If Low > Low[1] and High < High[1]
and (Close-Low)/(High-Low)>= threshold and Close > Average(Close,trendlen)
Then Buy This Bar at Close;
If BarsSinceEntry = Len1
Then ExitLong This Bar at Close;

If Low > Low[1] and High < High[1]
and (Close-Low)/(High-Low)<= threshold2 and Close < Average(Close,trendlen2)
Then Sell This Bar at Close;
If BarsSinceEntry = Len2
Then ExitShort This Bar at Close;