Tuesday, May 19, 2009

30/65 Minute NYAD

This is a little template I'm working on to gauge the probability of afternoon follow through of morning strength or weakness. It also has implications as the basis of an overnight only trading system.
The NYAD is the most important directional and momentum indicator in my trading toolbox and above are the 15 day charts of the NYAD using 30 and 65 minute bars. In the 30 minute case, the 6.5 hour trading day is displayed by 13 bars. In the 65 minute case the trading day is displayed by 6 bars.
The midpanel technicals remain with the same settings, hence the 30 minute chart is a bit choppier than the 60 minute. There's also some discrepancy between the parabolic signals and I'm exploring ways to smooth the curves. The 65 minute model clearly leaves a lot on the table, while the 30 minute model provides some real promise of gauging overnight action. While an ideal overnight model would involve buying or selling the close and then covering at the subsequent open, there's some work to be done here before deploying any serious capital to that strategy.
Such needed work includes refining the use of a moving average, standard deviation or z-score filter to qualify these overnight trades and is an area of research underway.
Of course, you can't actually trade the NYAD, but trading a basket of ETFs that are highly correlated to the NYAD is a tactical approach that initial test runs have shown to be highly consistent, especially if not deployed during the height of earnings season when overnight volatility and direction can yield some unpleasant surprises.

2 comments:

filip said...

Love your site. Your 816 nyad has really made a difference in my trading.

Trying to understand this 30/65 min... What do you look for in the close before a overnight swing..

The usuall, some form of bearish cross befor a short? Or have I missed something?

Again, thanx for a shareing your knowledge...

bzbtrader said...

fiki,
See Thursday's post. I'll continue this theme with Friday's post also.
Thanks for your feedback..