Hey folks, just wanted to share an idea which has occupied my mind for quite a lot of time. It is NOT a trading system yet, I've come here to discuss to finally find a proper complete setup for building a system.
What I'm speaking about is the situation when a day "crosses itself". Here's a simple example.
Let's assume that a day starts at 5 PM N.Y. time (the banks settlement). Let's assume also that the previous day had its close above open and â what is more important â above the previous day's high. Now it's all for daily charts and we go intraday. Usually half-hour timeframe is detailed enough but you can go as deep as ticks if you like. We are waiting first for a break of the previous (that "tall" daily candle) day's high. Right after it happens we place a SELL order below the current day's low (remember the day has not completed yet so we consider the day's low as the lowest price since 5 PM N.Y. time of yesterday till the very moment of breaking the previous day's high). If it executes, we place a stop just above the current day's high (the same bla-bla as about the current day's low). If it is not executed till 5 PM then we cancel it.
Now if the stop is not triggered we are now either at the very top of an uptrend or right at the end of a pullback in a downtrend. It can be seen easily with any trend-following indicator like MACD with standard parameters applied to daily charts. Also a 5-period Bollinger bands on daily charts are helpful to avoid trying to go counter-trend when the price is in the middle of nowhere.
Of course everything is equally applicable to going long symmetrically.
Now I have a number of questions.
1. What to do if a stop is triggered and price the again goes to "self-cross" the day?
2. Where to place exits? I'm sure there should be different exit strategies for topping of an uptrend and for topping of a pullback within a downtrend.
3. Maybe I'm trying to re-invent a bicycle then please point me to another source with similar ideas.
4. Has anyone noticed the same phenomena?
5. Has anyone understood what I've uttered above?
What I'm speaking about is the situation when a day "crosses itself". Here's a simple example.
Let's assume that a day starts at 5 PM N.Y. time (the banks settlement). Let's assume also that the previous day had its close above open and â what is more important â above the previous day's high. Now it's all for daily charts and we go intraday. Usually half-hour timeframe is detailed enough but you can go as deep as ticks if you like. We are waiting first for a break of the previous (that "tall" daily candle) day's high. Right after it happens we place a SELL order below the current day's low (remember the day has not completed yet so we consider the day's low as the lowest price since 5 PM N.Y. time of yesterday till the very moment of breaking the previous day's high). If it executes, we place a stop just above the current day's high (the same bla-bla as about the current day's low). If it is not executed till 5 PM then we cancel it.
Now if the stop is not triggered we are now either at the very top of an uptrend or right at the end of a pullback in a downtrend. It can be seen easily with any trend-following indicator like MACD with standard parameters applied to daily charts. Also a 5-period Bollinger bands on daily charts are helpful to avoid trying to go counter-trend when the price is in the middle of nowhere.
Of course everything is equally applicable to going long symmetrically.
Now I have a number of questions.
1. What to do if a stop is triggered and price the again goes to "self-cross" the day?
2. Where to place exits? I'm sure there should be different exit strategies for topping of an uptrend and for topping of a pullback within a downtrend.
3. Maybe I'm trying to re-invent a bicycle then please point me to another source with similar ideas.
4. Has anyone noticed the same phenomena?
5. Has anyone understood what I've uttered above?