61.8 % FR within the first 30 min bar revisited
- Thread starter wally_
- Start date
I think profitseer was referring to the fact that as volume continues to increase on the overnight sessions, the behavior of the opening will slowly change. Systems that rely on past behavior of opening gap may need to re-evaluate the effect of increased activity during overnight sessions. Some of those old patterns may need to be tweaked. Fortunately, this will be a gradual change and not a shock type change.
The daily data was for a completely different system, not something like this. I feel happy for you that you have a daily data. Feel great. I do think you deserve it. I did not have it at that time and still do not have it, but backtested that system using other data that I got. If you think that a good data/chart package is something that will give any edge welcome to the 90% club. I can trade without that. Yes, my systems work, but that has nothing to do with backtesting. Systems can work even if they have never been backtested. On the other hand, even well-backtested systems can fail.
BTW, I don't know how this relates to the setup I proposed. The setup is simple and if you really have the data you claim you do and know how to use it for backtesting you can backtest it yourself. That would be really constructive. I just proposed a simple idea I noticed it works and I am not forcing you to use it.
I'll wait until the gap stops filling before I re-evaluate and tweak. The old patterns like the 30 minute break which has worked for years or the older patterns like Edwards and Magee that continue to work? Or even Fibonacci from the 13th century is it... that still works too despite a massive increase in volume?
As far as I remember, not even once, in other words: all winners. I do not follow that very closely either because I do not always have a chance to use it. Only if I have a contract or two free, but most of the time this is not the case as they are taken by my regular mechanical systems.
Only one thing: some people asked me in the past to post the charts of what I was talking about and it just happened that on Dec 20th there was another example of the same pattern that occured the day I was talking about bouncing off that magic number.
I have at least three different types of charts, some have indicators, some don't.
It is good to use it in combination with stochastics, say when you see a stochastics divergence. I advocate this appraoch. Also, the second picture is showing the uptrend is intact and the retracement in question is a pullback that you can use for an entry. The main advantage of this setup over the pure stoch divergence setup is that you have a more precise entry point as well as a well defined stop-loss. It is thus a perfect setup for a beginner. Of course, I am not saying anyone has to use it. I am not selling anything here. Just a simple idea I noticed that works time and again.
Quote from Corallus:
My God, Wally. How do you see your price bars through all that multi-colored spaghetti?
Sometimes I do not care about it. My systems tell me my entries and exits, so I sometimes even do not watch charts at all. That was some experimental chart, not something I really use.
I didn't say that all working methods/patterns will be rendered useless as a result of increased volume on 24-hour trading, only that you need to be aware of the potential impact of this gradual, but fundamental change to the market's opening behavior.
Some methods should very well continue to work regardless of this change, while other methods may not continue to perform. For example, Tony Crabel, often revered by many traders as a role model for going from trading book author using objective systems analysis to $2B fund manager with no losing years, and as the king of opening range trading, is now taking a beating. Perhaps the combination of increased volume on overnight sessions has fundamentally changed the impact of the opening range/gap analysis. Perhaps that combined with the different character of the current bear market.
Who knows the reason. What I do know is Crabel uses very strict pattern based system with extensive backtesting showing statistical significance. But backtesting any methodology, regardless of statistical significance (i.e. confidence intervals), only works so long as the underlying dynamics that you are modeling do not change beyond the ability of the system/method to capture that trading edge. This is why so many system traders and other prediction models such as NN's fail. Backtesting alone in-and-of-itself, even if done with proper discipline for robustness and significance, are always at risk of changing dynamics. You have to find ways to identify enough of the dynamics a priori and build tests to validate the behavior of these dynamics separate from your system. In case of dealing with only observed data (e.g. NN's) there are still ways to identify the effects of shifting dynamics because you at least know what the inputs are, even though you do not know how the inputs are utilized. Some of this is addressed with chaos/complexity theory. The vast majority of the work in this area is all proprietary and I have seen almost no public information on this topic.
As far as Edwards & Magee and Fib are concerned, I am specifically talking about the opening range which is what inandlong specifically discussed. As you know, there are many strategies based solely on the behavior of the opening range. Do a search on all the opening orders trading on ET, for example. All of Crabel's revered work (and his out-of-print book selling for $1500) deals specifically with ORB-related patterns.
Now what happens to all of those specific strategies if the fundamental nature of the opening changes? These strategies will have to be tweaked. Like I said, this change will be gradual.
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