johnnydrako
Newbie
- Messages
- 3
- Likes
- 0
Below is a system I found 10 years ago in Tech. Analysis of Stocks & Commodities. It is very simple and trades on weekly breakouts.
I have begun manually back-testing it on T-Bonds and will appreciate any comments.
Note to Webmaster: I tried uploading this system as an attached file but an error would not allow this (click the Browse button and nothing happens).
Tracking Data:
• Weekly high
• Weekly low
• Weekly close
These three numbers provide all the data needed to mechanically trade these markets.
Contracts:
• U.S. T-bonds
• Japanese yen
• Others? Should work with anything that trades in high volume.
In / Out Signals:
• When two consecutive weekly closes occur that are higher than the highest price of the previous week, there is a buy signal. (Figure 1).
• Whenever two consecutive weekly closes occur that are lower than the lowest price of the previous week, there is a sell signal (Figure 2).
Figure 1.
Example of a Buy Signal
High Low Close
Week 1 98-00 90-00 95-00
Week 2 101-00 88-00 99-00
Week 3 105-00 97-00 104-20
The closing price of Week 2 (99-00) is higher than the highest price of Week 1 (98-00), and the closing price of Week 3 (104-20) is higher than the highest price of Week 2 (101-00). According to the rules of the system, we now have a buy signal, so we initiate a long position at the weekly close of 104-20. We would enter this buy order in the last ten minutes of trading (“at the close”) for that week, usually on a Friday.
Figure 2.
Example of a Sell Signal
High Low Close
Week 1 110-116 108-02 108-08
Week 2 111-00 105-21 107-23
Week 3 108-09 100-13 102-17
The closing price of Week 2 (107-23) is lower than the lowest price of Week 1 (110-16), and the closing price of Week 3 (102-17) is lower than the lowest price of Week 2 (105-21). According to the rules of the system, we now have a sell signal, so we initiate a short position at the weekly close of 102-17. We would enter this sell order in the last ten minutes of trading (“at the close”) for that week, usually on a Friday.
Maximum Time in Market
Positions will normally be closed after eight weeks; however, three situations allow us to vary this eight-week rule:
1. Go Flat
If we are long, and during the eight-week period there is a weekly close below the lowest price of the two (higher) weekly closes that gave us our original entry signal, we go flat. (The reverse would be true for a short position.)
Example: The lowest price of the two higher weekly closes is 88-00. Therefore, once we have an open, long position, a weekly close below 88-00 would flash us a signal to exit the position (go flat).
2. Reverse Position
If we are long, and during the eight-week period there are two consecutive weeks in which the market closes lower than the lowest price of the previous week (a sell signal), we reverse our long position and go short. (In the case of a short position we would we would reverse to initiate a long position.)
Example: A sell signal occurs before the eight weeks are up (two weeks in a row in which the market closes lower than the lowest price of the previous week). In this case we would reverse our long position and go short by selling two contracts (the first contract sold will close out our long position and the second contract sold initiates our short position). [show actual example here]
3. Extend Position
If we are long and the closing prices of weeks 7 and 8 are both higher than the highest price from the previous week (a buy signal), we remain long, with the eighth week as our new starting point.
Example: We get a buy signal on the eighth week (the seventh and eighth weeks would both have to close at higher prices than the highest price of the previous week), in which case we would keep the long position open and begin the process again with the eighth week as our new starting point.
Note: a buy or sell signal in any two weeks prior to weeks 7 & 8 could feasibly be viewed as a signal to initiate an additional position. But for purposes of testing we are not doing this.
Rollovers
Open contracts are rolled over into the nearest futures contract on the last day of the last week of the month preceding the delivery month of the contract in which we have an open position.
1. Example: If we are long one contract of March 2002 T-Bonds (US02H) – and it is the last day of the last trading week of February – we would sell the March contract and immediately purchase one contract for June 2002 T-Bonds (US02M).
I have begun manually back-testing it on T-Bonds and will appreciate any comments.
Note to Webmaster: I tried uploading this system as an attached file but an error would not allow this (click the Browse button and nothing happens).
Tracking Data:
• Weekly high
• Weekly low
• Weekly close
These three numbers provide all the data needed to mechanically trade these markets.
Contracts:
• U.S. T-bonds
• Japanese yen
• Others? Should work with anything that trades in high volume.
In / Out Signals:
• When two consecutive weekly closes occur that are higher than the highest price of the previous week, there is a buy signal. (Figure 1).
• Whenever two consecutive weekly closes occur that are lower than the lowest price of the previous week, there is a sell signal (Figure 2).
Figure 1.
Example of a Buy Signal
High Low Close
Week 1 98-00 90-00 95-00
Week 2 101-00 88-00 99-00
Week 3 105-00 97-00 104-20
The closing price of Week 2 (99-00) is higher than the highest price of Week 1 (98-00), and the closing price of Week 3 (104-20) is higher than the highest price of Week 2 (101-00). According to the rules of the system, we now have a buy signal, so we initiate a long position at the weekly close of 104-20. We would enter this buy order in the last ten minutes of trading (“at the close”) for that week, usually on a Friday.
Figure 2.
Example of a Sell Signal
High Low Close
Week 1 110-116 108-02 108-08
Week 2 111-00 105-21 107-23
Week 3 108-09 100-13 102-17
The closing price of Week 2 (107-23) is lower than the lowest price of Week 1 (110-16), and the closing price of Week 3 (102-17) is lower than the lowest price of Week 2 (105-21). According to the rules of the system, we now have a sell signal, so we initiate a short position at the weekly close of 102-17. We would enter this sell order in the last ten minutes of trading (“at the close”) for that week, usually on a Friday.
Maximum Time in Market
Positions will normally be closed after eight weeks; however, three situations allow us to vary this eight-week rule:
1. Go Flat
If we are long, and during the eight-week period there is a weekly close below the lowest price of the two (higher) weekly closes that gave us our original entry signal, we go flat. (The reverse would be true for a short position.)
Example: The lowest price of the two higher weekly closes is 88-00. Therefore, once we have an open, long position, a weekly close below 88-00 would flash us a signal to exit the position (go flat).
2. Reverse Position
If we are long, and during the eight-week period there are two consecutive weeks in which the market closes lower than the lowest price of the previous week (a sell signal), we reverse our long position and go short. (In the case of a short position we would we would reverse to initiate a long position.)
Example: A sell signal occurs before the eight weeks are up (two weeks in a row in which the market closes lower than the lowest price of the previous week). In this case we would reverse our long position and go short by selling two contracts (the first contract sold will close out our long position and the second contract sold initiates our short position). [show actual example here]
3. Extend Position
If we are long and the closing prices of weeks 7 and 8 are both higher than the highest price from the previous week (a buy signal), we remain long, with the eighth week as our new starting point.
Example: We get a buy signal on the eighth week (the seventh and eighth weeks would both have to close at higher prices than the highest price of the previous week), in which case we would keep the long position open and begin the process again with the eighth week as our new starting point.
Note: a buy or sell signal in any two weeks prior to weeks 7 & 8 could feasibly be viewed as a signal to initiate an additional position. But for purposes of testing we are not doing this.
Rollovers
Open contracts are rolled over into the nearest futures contract on the last day of the last week of the month preceding the delivery month of the contract in which we have an open position.
1. Example: If we are long one contract of March 2002 T-Bonds (US02H) – and it is the last day of the last trading week of February – we would sell the March contract and immediately purchase one contract for June 2002 T-Bonds (US02M).
