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Honestly, I read the post that basically asked for a purely technical system. We trade lots of pullback systems so I just threw this together in 5 minutes, wrote 10 lines of computer code and ran it through one of our systems to check it. it's not fantastic but it works and illustrates the...

In my opinion you need: An actual edge in the market. There are many possible edges. The personality, discipline and learned behavioral traits to apply that edge successfully. Proper money management and risk management. Sufficient bankroll. Sorry folks... $3K in an Ameritrade account...

No... from reading your post I wouldn't expect you to understand the *edge* thing. I can tell you I know far more professional traders who scale out than who add to winning positions. Personally I tend to put on my position in 1 or two pieces and scale out as the position moves in my favor...

Post it and I'll look at it. I also know Larry Conners has some stuff that is similar to this, but I have issues (of course, I always have issues) with his research process.

The only exit is the one given... at some point it will trade above the median of the shortest window (I think I gave 5 in the original system) and that's when you get out. And yes, this could potentially be at a very severe loss. Every day would generate a new set of percentiles, but once...

No it's not at all the same. Bollingers have a fatal flaw in their concept and we did discuss my bias against any indicator that is simply a derivative of price. With a few exceptions (Bollingers are not one of the exceptions) they just don't test out to have a quantifiable edge... another...

Apologies. The confusion here comes from Excel which uses a fairly non-standard calculation for percentiles. In our programming, we use R or C and only use Excel for quick and dirty analysis. Since I was at home, I just blasted Yahoo data into Excel and didn't think about the details...

yes... you're buying weak stocks here... making sure that those stocks are not right on their long term lows is fairly important. i'm not saying you can't have a disaster buying a stock right on their highs, but historically most meltdowns come when stocks are closer to their lows. this is...

Thank you. Solid work and hopefully enough to inspire some more interest in this little system! your signals of course are slightly different than what i see on my screen because your criteria are slightly different. it would be interesting to see if 3 red candles works better than 3 closes...

closing price. the system as i gave it here only requires closing price. now, it might be smart to use highs / lows, but as a starting point i just gave closes.

This is certainly something that should be considered. Not sure I know what you mean by "hard to scale up" though. At any rate, people looking at this idea should consider the ramifications of removing condition 1. Though I haven't run the test I am sure it would dramatically increase...

No need for apologies. You're overthinking... no need to detrend anything... use the simple rules I posted exactly as they were given as a starting point. There's nothing significant left out... we trade a slightly different parameter set but it's basically the same thing.

You can't overestimate the importance of manual backtesting. Even in a quantitative intraday test that may test more than 100,000 occurrences of a pattern (no exaggeration) it is still a good idea to look at as many by hand as possible. This is a very good point, and this system is a good...

The basic idea behind a percentile is to rank the observations and then take the Nth percent of the observations, interpolating if necessary. This is a pretty simple concept. Using Microsoft Excel and data available from Yahoo I calculate for AAPL that the 10th percentile of the past 15...

I received a PM question about percentiles. I didn't intend to make this difficult but it seems there may be a perception that I'm using obtuse concepts here deliberately. I think percentiles are much more simple than most of the indicators people use... what we're saying here is you take, for...

<sigh>... ok then... for those folks here's another kind of idea: Buy the close of this bar when: 1. it is above the 50th percentile of the past 200 days' closes. 2. it is below the 10th percentile of the last 15 days' closes. 3. It is the third consecutive close down. Exit conditions...

BeaoWo, Can we discuss this not actually having anything at all to do with pairs trading?

Ok... let's discuss. This system isn't pairs trading at all... it's a simple overbought / oversold system that actually has NOTHING to do with pairs. The backtest takes advantage of the inherent legerage of the instruments to make performance look much better than it actually is. Mean...

more on the second strategy i wrote about here (earnings drift): http://www.cxoadvisory.com/blog/external/blog11-24-09/

Can I ask what people find so complicated about this? I guess I admit this thread got badly derailed by my "interaction" with BoWo and I was also pretty thrown off by people saying this little system was complicated. Is it that it requires "outside" information? Meaning information not...