Something i notice many traders use

T

TIMMY57

At my prop firm I notice that many traders use the day's high and the day's low. I've been backtesting several different ideas for the past month but really can't find anything profitable using the daily high & the daily low.

I was wondering if someone would be able to help me out?


Thanks in advance
 
Once a high and low for the day are established, you can go long at a re-test of the low or short a re-test of the high. Because you have a firm high and low price to work off of, you can set a tight stop. If the trade goes in your favor (fails to make higher high or lower low) you make money. If it doesn't go in your favor, you limit loss with your tight stop, and chances are if it breaks down the day's low, or breaks out from the day's high, you will be very happy to have limited the loss.
 
Quote from NoDoji:

Once a high and low for the day are established, you can go long at a re-test of the low or short a re-test of the high. Because you have a firm high and low price to work off of, you can set a tight stop. If the trade goes in your favor (fails to make higher high or lower low) you make money. If it doesn't go in your favor, you limit loss with your tight stop, and chances are if it breaks down the day's low, or breaks out from the day's high, you will be very happy to have limited the loss.
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Kind of depends on "when" the day's high and low is calculated. You can use a 5 minute, 10 minute, or 15 minute bar strategy successfully. You need to do the homework on which stocks statistically break those levels.

Easy money management as well.
 
Quote from NoDoji:

Once a high and low for the day are established, you can go long at a re-test of the low or short a re-test of the high. Because you have a firm high and low price to work off of, you can set a tight stop. If the trade goes in your favor (fails to make higher high or lower low) you make money. If it doesn't go in your favor, you limit loss with your tight stop, and chances are if it breaks down the day's low, or breaks out from the day's high, you will be very happy to have limited the loss.
More...


hmmm I may not be the brighest crayon in the box, but I have backtested several versions of this strategy and can't really find anything worthwhile trading after slippage & commission
 
Quote from TIMMY57:

hmmm I may not be the brighest crayon in the box, but I have backtested several versions of this strategy and can't really find anything worthwhile trading after slippage & commission
More...

Timmy, check out my journal:

Page 17, 9/27 post has a MA chart with an illustration of S/R (day's highs and lows) and how they can be used:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=132626&perpage=6&pagenumber=17

Then look at the MA chart on page 16 for 9/25's post and the CELG chart on page page 18 for 10/20's post, both of which I took advantage of failure's to make new lows on the day.
 
Hey Timmy,

Was curious to see what you thought of NoDoji's ideas?

From my experience so far, I have to agree that I don't see a great strategy in that method.

But, I'm thinking that there is more to it than I'm currently seeing.

In theory, it would seem very elegant that the first confirmed high and the low of the day should be significant. But is it? Can simple trading rules be designed around these clear S/R areas?
 
You can see this at work really well on any 3-min chart. AAPL establishes the LOD today at 97.21, stages a small bounce and falls back to 97.24, There's your higher low. Go long on the next 3-min bar and you get to ride above 103. It establishes the HOD of 103.60, then fails to break higher. Short and you can take profits anywhere along the way down to 99.22, where it pivots. Since it pivots well above the LOD of 97.21, you can go long until it fails to break above 101.30.

I can personally pick great entries on my trades, but my trade management afterwards sometimes leaves much to be desired :eek:
 
Quote from NoDoji:

You can see this at work really well on any 3-min chart. AAPL establishes the LOD today at 97.21, stages a small bounce and falls back to 97.24, There's your higher low. Go long on the next 3-min bar and you get to ride above 103. It establishes the HOD of 103.60, then fails to break higher. Short and you can take profits anywhere along the way down to 99.22, where it pivots. Since it pivots well above the LOD of 97.21, you can go long until it fails to break above 101.30.

I can personally pick great entries on my trades, but my trade management afterwards sometimes leaves much to be desired :eek:
More...

Thanks for responding, NoDoji. Here is where the analysis falls short for me. How did you know as it was happening that 97.21 was the low of the day?

You'd first have to establish a rule. I think someone tested something like on this site somewhere. For example, I will use the low that occurs in the first 30 minutes of trading or the low that occurs between market open and 10:30 as the low to trade from. (Or a high within that time frame.)

Is there some other way to determine this except by making a decision on your "rule?"
 
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