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Squawk / 26 May 2016 at 11:53 GMT
Hypothesis Testing
United Kingdom
Not sure if this is of use to anyone....
To build on this theory;
https://www.tradingfloor.com/posts/trading-between-a-roc-and-a-hard-place-7640410
We currently see the FTSE 100 market (daily chart) that the Rate of Change is above the zero value line and still ascending implying a rally to continue BUT the rate of expansion of the trading range is declining. Thus a close below yesterdays trading high would suggest imminent profit taking so bulls beware imho.
Chart attached to show prior incidences.
NOTE the ROC must be in positive territory for this strategy and ascending.
Normally this also works with the major fx pairings too :-)
1y
zefy zefy
Thanks. I was thinking how to detect ROC stalling in code and was thinking to implement it by comparing ROC.today to ROC 3 & 5 &10 days ago ...
1y
zefy zefy
Meaning rules to close position due to ROC stalling...
1y
fxtime fxtime
Yeah that can work.....DeMark back tested 3,5,7 and got the same returns but at 10 he found he was only just above b/e....usually for a trailing algo stop however I rely more onpercentiles. Rates of change for profits on my systems tend tend to seek (obviously) the fastest return so a ROC that contracts by 0.25 (25%) of prior day ROC value would flag up as a concern. If you were establishing an algo as per a three way function such as eurgbp/eurusd/gbpusd then a matrices function is preferrable with a weighting system to the overiding average line that is above the other two...thus eurgbp has the over-ride and is biased to the short side and it is the roc of the other two that control position adjustments IN RELATION to each other eg a simple ratio would work or plotting the k/skew against each other would work too. Their respective curve crossovers must stay within implicit 1st std dev region. You can make the stop function really complex or the simplistic 0.25 x prior day range.
1y
zefy zefy
Good points. I will test 25% rule too.
1y
zefy zefy
Interestingly 25% ROC based stop avoids sudden fast drawdowns which are difficult to avoid by MA based rules. But requires further study... Also it seems I need to modify evaluation of new trade entry rules after ROC stop...
1y
zefy zefy
Will continue tomorrow...
1y
fxtime fxtime
I am off site virtually all day so will try and give some suggestions late today for you.
1y
zefy zefy
I used combination of RSI5 and breakout of 3-day trading range from your previous posts to define re-entry criterias. Results look pretty good now.
As I have mentioned finding correct stop settings has been the most difficult part for me and it looks now that this ROC based stop is what I have been searching...
1y
fxtime fxtime
Yeah it is a good trailing stop...well done at back testing too. The 3 day gave a superb entry on SP500 btw :-)
I am still off site so have no chart access at present but presume you are earning happilly :-)
1y
zefy zefy
Yep, it is very good now. Your articles and contribution here have tremendous impact in improving my systems!
1y
fxtime fxtime
Well we got our retrace started :-)

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