Interesting results on what would have resulted from setting a closer target than the BB range over the last 3 weeks. To make this simple I have taken two potential closer targets, 12pts and 24 pts. The average 0800-0900 BB range for 2011 so far is 36, so these figures are handy but are one-third and two-thirds of the target and stop currently used on average anyway.
As well as bringing the target in to +/-12pts and +/-24pts, I have also brought the stop in to the same value, so that the trades remain symmetrical. That is, I didn't want to have a target 12pts out when the stop on a 36pt BB range day was three times further in the opposite direction from entry. This means that neither level has a basis in TA, but the target never did anyway.
Current system - BB range gives target and stop -
3 targets hit, 2 stopped out, 5 expired +ve, 4 expired -ve, 1 no trade.
For 12pt target and stop -
11 targets hit, 1 stopped out, 0 expired +ve, 2 expired -ve, 1 no trade
For 24pts target and stop -
6 targets hit, 3 stopped out, 2 expired +ve, 3 expired -ve, 1 no trade
As you might expect, a 12pt target is hit 78%, almost every time, impressive performance. There are two potential problems:
1) occasionally I have found price moving at exactly 9am through the BB limit: this can mean entry is not at the optimum level but several pts into the target range: if this is only 12pts wide, this can be a significant slippage.
2) I usually set long entry at BB high +2pts and stop at BB low -1pt. With only a 12pt target / stop, this approach to order-setting makes the trades very unbalanced, so that a win makes only 10pts, whereas a loser makes -15pts. Alright, the stop seems very unlikely to be hit, but a win:loss ratio of less than 1 is something to be aware of.
