Price movements in the same direction?

[uasish]

As now Gaps are insignificant occurence let us shift to find whether yesterday's O & C has any significant effect to-day.
Niranjanam , this they are doing on Daily data,after a reasonable conclusion ,we may try on higher time frames,to see whether our conclusion on daily is validated or not.

 

[beginner_av]

I don't know if it applies to this thread, but probably worth a look...

In Bollinger Band Study in conjunction with Candle Stick:

For Bollinger Band (Settings: Source - Close, Period - 9, Std.Deviation - 2, MA - Simple)

Condition For A Compelling Buy the next day would be a close below the Lower Bollinger Band.

Example as of today would be BAJAJAUTO which has sort of closed almost at the Lower BB, Let us see what happens on Monday.

Other Possibilities with this study being that it may close for another few sessions below the lower BB, but eventually does move up quite substantially.

Do pardon me if this doesn't belong here, but thought of sharing it.

Happy & Safe Trading

SavantGarde

Dear Savant,

My newbie two cents:

Use this with a trend filter or else "walking the bands" may give poorer results. Bollinger himself proposes MFI, II, AD Osc, Vol Weighted MAs etc.

Regards

 

[Venu_CA]

The data is tested from 1897 and not 1987.

One thing I have not taken into consideration is the magnitude of the rise or the fall. If the rise is sharp and the fall is small, the direction of price movement would be up with blips but that is not what I intended to show through this study.
Through this study, the question I put forth was, is today's price movement a variable which affects tomorrow's price movement?
Assuming no other variable affecting the event, the probability that the price will move in a particular direction is 50%. Now, if we assume direction of today's price change as a variable, the probability that the price will change in the same direction (tested with 100years of Dow data) is about 52%...not significantly different from the 50% mark (by look of the naked eye).

Let me share some thoughts

I think todays price movement is not a variable affecting tomorrows price action. Price action is the effect and not the cause. Key to successful trading is the skill to identify and isolate the variables that affect the price action and act accordingly.

Trading is a pure probability game . Selecting the stock with the highest probabilty of moving in the anticipated direction is the trick of the trade. Skill to select the winning horses will make you a super trader.

In my humble opinion the thread is going in the wrong direction.From price now we have reached B Bands and other indicators, and this way we will not be able to make any logical conclusion.

Here is my suggestion. Let us run the scan on all the NSE stocks for a period of 3 months and rank them according to the same directional move. We will try to find out what is special with these stocks and will also make an effort to quantify it where ever possible.

If this is possible , I think there will be marked improvement in trading success. We can also test the other concepts also

Regards

Venu

 

[kkseal]

Thanks Oxy for the testing.

For all such conditions a little eyeballing can improve results.

In case of gaps for instance, i would trust the breakaway gaps most (that too for next 1-2 days) Next in order would be continuous gaps (if other parameters are strong); but gaps that develop after a long move in one direction are more likely to be exhaustion gaps & hence less trustworthy.

A little visual processing can i think dramatically improve the win/loss.

Regards,
Kalyan.

 

[kkseal]

Hello Friends

I think we are on the right track.There is substantial evidence that indicates stocks that perform the best (worst) over a three to 12 month period tend to continue to perform well (poorly) over the subsequent three to 12 months. Momentum trading strategies that exploit this phenomenon have been consistently profitable in the United States and in most developed
markets. Similarly, stocks with high earnings momentum outperform stocks with low earnings momentum.
To make money consistently , the trading methods should be based on statistically proven central tendencies of the market. Momentum based systems will work in all markets.

Niranjanam

Also without directional continuity in price there can be no trend.

 

[kkseal]

I think a buy-in-first-hour-sell-in-last-hr kind of day trading system is possible, even without the benefit of streaming RT quotes or minute-to-minute monitoring. (Though it may not be as profitable as closely-monitored, multi-trade day-trading)

Off-course one will need to have more than one condition to generate at least 2-3 high-probability trades each day. Also, apart from OHLC, there are so many other things to play around with - trend, volume, volatility, momentum, support-resistance, sentiment, patterns etc. Optimal incorporation of one or more of the aforementioned can result in a fairly robust system.

Regards,
Kalyan.

 

[Venu_CA]

Hello Friends

I think we are on the right track.There is substantial evidence that indicates stocks that perform the best (worst) over a three to 12 month period tend to continue to perform well (poorly) over the subsequent three to 12 months. Momentum trading strategies that exploit this phenomenon have been consistently profitable in the United States and in most developed
markets. Similarly, stocks with high earnings momentum outperform stocks with low earnings momentum.
To make money consistently , the trading methods should be based on statistically proven central tendencies of the market. Momentum based systems will work in all markets.

Niranjanam

Hi Niranjan

Thanks for sharing the document.
You are absolutely right dear friend. Momentum based methods will work in all the markets, all the time ,in all the time frames,if you know how to play it.
MoserBaer! Earnings Momentum. What else ?

 

[uasish]

Ajay,

Would you release the final outcome of your Beta testing if completed.
kkseal's (To-day's close depends on yesterday's close relative to it's position in yesterday's H L ,range).
B.Bot's result is good.
Whether Weekly/Monthly close vis a vis previous has any effect.

Asish

 

[oxusmorouz]

Let me share some thoughts
In my humble opinion the thread is going in the wrong direction.From price now we have reached B Bands and other indicators, and this way we will not be able to make any logical conclusion.

I do agree that BB was a big jump, which is why I have made the results short and not extensive as I did in the previous 3 cases. My plan was to hover around OHLC permutations before moving to any derivatives of price, which I shall do.

Here is my suggestion. Let us run the scan on all the NSE stocks for a period of 3 months and rank them according to the same directional move. We will try to find out what is special with these stocks and will also make an effort to quantify it where ever possible.

This thread was not started with the purpose of finding rules with probabilistic edge but to eliminate ones which do not have any. With the combination of OHLC or most derivatives of price, I doubt if there exists 1 with a significant edge (which is subjective), atleast in backtest.
If we were to arrange the NSE stocks in the order of their directional move, it would give rise (and scope) to narration. "Causes" would have to be determined to support the narration and evidence would have to be based upon these subjective causes, rather than the case being vice versa.

Obliged.

 

[beginner_av]

Hello Oxy, you are right in your observations about out-of-sample testing and the post immediately above. but let us not restrict this (depending on your time constraint) just to OHLC. If you are willing to test momentum, then volatility comes in naturally, as without volatility expansion, there cannot be momentum (unless you are testing only steady trends). If you are testing only OHLC, then instead of just one day's relationship, you will also have to test channel breakouts, n-bar H-L, ORBs, Inside/Outside Bars, range breakouts etc as they are all dependent on OHLCs.

Regards