ES Journal - 2012
- Thread starter Buy1Sell2
- Start date
- Status
I encourage you to do some analysis on this to verify that. Specifically, do portions of the 30 min bars have to trade inside VA, or does one of them have to close inside? What portion of the second 30 min bar must trade inside the VA, or is 1 tick enough?
If you give me specific criteria, I will test this for you. I've tested a very similar premise to this before, but the thing is the criteria need to be very specific to substantiate a claim of 80%. -- if the criterion is vague, as yours seems to be here, then the 80% figure is also vague and very unreliable (which kind of defeats the purpose of having a percentage in the first place!
)Quote from JoshDance:
I encourage you to do some analysis on this to verify that. Specifically, do portions of the 30 min bars have to trade inside VA, or does one of them have to close inside? What portion of the second 30 min bar must trade inside the VA, or is 1 tick enough?
If you give me specific criteria, I will test this for you. I've tested a very similar premise to this before, but the thing is the criteria need to be very specific to substantiate a claim of 80%. -- if the criterion is vague, as yours seems to be here, then the 80% figure is also vague and very unreliable (which kind of defeats the purpose of having a percentage in the first place!
+1
I read a thread on this topic on traderslaboratory around a month ago. As far as I remember, the conclusion was having a very strict and a particular criteria did had a >70% probability however when you make the criteria very particular, the number of days per year fell to like less 30 or so - if I remember correctly. I didn't pursue it much and left it on a to do list for future work - as anything that trades 25 days in 252 days in a year is way too less for my taste.
On a similar note of having a percentage chance for price to be at a particular point during the trading day - there is a webpage available on google search that states that for eurusd, there is a 95% probability that price will trade within 5 pips of its yesterday pivot. Sounds interesting - right to construct a trading strategy around this statistic - however, at least I have not been able to build one yet - although I think it might be possible. one of the big reasons is distance between yesterday pivot and today's open might be too small - thus leading to a very small average trade profit (compared to commissions/slippage) - and the strategy will endure massive drawdowns from time to time. Your R:R in such a vanilla strategy would be massively inverted like 1:6 or even 1:10 in some cases. In my experience, its much better to develop more generic strategies like momentum based, mean reversion based rather than on such stats. Only exception I can think of are gap strategies - which work well and are based on a stat.
I'll try to explain this point. If a market opens outside its value area (where 70% of the prior sessionâs volume traded) and then trades into value for two consecutive 30 minute periods, there is an 80% chance that the market will rotate all the way to the other side of value.
For example, lets say today's value area in the /ES is 1356.75 â 1345.50 and the market opens at 1360. During the course of the morning it trades lower and two 30 minute consecutive periods trade below 1356.75. There is now an 80% chance that the market will trade to 1345.50 before the end of the day but you need to know some tips:
âNeither 30 minute period has to close inside of value in order for the rule to be satisfied, just needs to trade inside it. If the first 30 minute period closes inside of value, then the rule is automatically satisfied as that implies that the second one will open inside of value. You need not wait for the second 30 minute period to close.
âThe rule works both ways, whether the market is moving down from above the value area or up from below it.
âIf the market opens up inside of value and then trades out of value, the rule applies the same way. If the market can trade back inside value for two consecutive 30 minute periods, then it has an 80% chance of rotating to the other side of value.
âContext is extremely important. Do not trade this rule mechanically and expect to have good results. Always judge the strength of any directional move in terms of market internals, overall
- Status