Long Only Dow System >85% win rate

[the blades]

Hi FC,



I like the idea of leaving alimit order in place after the close of the initial down day and setting this at a few points below the close to reduce the impact of the spread. Anyone have any thoughts on the mechanics of entry using spreadbetting if following this strategy?



David

I trade the FTSE at close (4.35 ish). On down days, I get aon average approx -2pts (one of these being the spread). Unless the Dow behaves differently, the slippage shouldn't kill the system.

UTB

 

[dpfuller]

Thanks Blades, looks promising.

 

[solentsurfer]

Not sure I fancy trying this strategy this month.

A stop of 6-7% of the index value seems an awful lot - am I understanding that correctly - over 600pts?

 

[FetteredChinos]

yup.. 600pts isnt all that great...

the Dow usally moves 300pts in a week anyway..

these are disaster stops, remember..

FC

 

[twiggytwo]

limit order entry

Hi FC,

this is fascinating, the backtest results look very encouraging. Simplicity is certainly the key and if the system is mechanical with no discretionary elements this should be a winner over time.

The stop of 6-7% is rarely hit as you say and in the majority of trades doesn't come anywhere close to being hit.

Getting an entry point as close as possible to the close of the down day could be an issue if spreadbetting, there are several ways you could enter the trade:

- Enter after hours on the initial down day, possibly improving on the close level if sentiment remains down
- Leave a limit order to buy 5-10 pts below the close, this wouldalso mitigate the spread.
- Enter on the day after the initial down, although this could result in not being able to enter at the desired level.

I like the idea of leaving alimit order in place after the close of the initial down day and setting this at a few points below the close to reduce the impact of the spread. Anyone have any thoughts on the mechanics of entry using spreadbetting if following this strategy?

FC - thanks again for sharing this. You've certainly given us some food for thought.

David

Hi Dp, You may find the Spread betting Co will not allow you to place the Order as you state
this may be too close to the closing price .
But look at what they offer after the close as it may be possible
FINS will open the trade at 7-00am at the current price at that time so it may GAP DOWN through your Order price if shorting
or GAP UP through your Order price if Buying
SO TAKE CARE!
regards

 

[dpfuller]

Hi Twig, i think you're right. This will need to be a market entry rather than a limit order if done at the close of the initial down day.

regards

 

[twiggytwo]

Market Orders

Hi Twig, i think you're right. This will need to be a market entry rather than a limit order if done at the close of the initial down day.

regards

Hi Dp, I have had a look at FINS Guaranteed Orders to open a position and so not get a Gapped Price

Sorry to say this is useless
Last week the Dow gapped down by 92 points on the March contract and this was a very big [/B] Gap for the Dow

to have a Guaranteed opening Order you have to pay for it
4 points x your stake this is taken from your CASH
And the price can only be set 100 points from the last current quote ( this will be the quote after the close at 9-00pm and the trading desk is closed at 9-15pm
regards

 

[highisland]

Entry Rules:

Wait until the 24th of each trading month, as the window for trading longs is from the 24th to the end of each month...

When we are in this window, we look for a Down Day (of any percentage).

We the go long as close as possible to the close of this down day.
FC

So with this system, you'd have bought as close to yesterday's close as possible (because it closed 3 points down from Tuesday) and then you'd look to exit on the first profitable uptrade.
Makes sense (at least in this month's context, or unless the DOW falls off a cliff)

 

[FetteredChinos]

thats the one, High...

though the exit isnt quite right.. its the 2nd exit after the down day..

went long on wednesday's close... first time we would look for a profitable close is friday.. so if friday closes up from wednesday we take the profits, or hold for a profitable close within 6 days..

pretty groovy if you ask me..

FC

 

[dpfuller]

thats the one, High...

though the exit isnt quite right.. its the 2nd exit after the down day..

went long on wednesday's close... first time we would look for a profitable close is friday.. so if friday closes up from wednesday we take the profits, or hold for a profitable close within 6 days..

pretty groovy if you ask me..

FC

FC - what entry point did you manage? I watched the price through the close last night with Cap Spreads and it seems to spike up almost immediately - 10730ish and hasn't so far looked back.

 

[FetteredChinos]

didnt actually trade this one this time around.. been experimenting and testing some cable strats so missed the entry..

from previous experience on trading close-close on the FTSE and Dow, i try to enter a couple of minutes before 4.30 or 9pm, i am one of those souls who prefers to be in a trade, rather than out of one..

FC

 

[dpfuller]

I think you're right to enter a few mins before the close, otherwise you run the risk of getting no entry anywhere near the close.

This strat worked well on the FTSE this week, would have got a good entry at close on 24/1 and now be up 80+ points.

 

[FetteredChinos]

well this system would have bagged you +170 points at the moment, and almost certain to close out at tonights close...

not bad for a freebie

 

[Vaco]

I have a similar idea which i would be gratefull if someone could back test for me and pos the results.

The dow seems to follow through with the weeks trend on fridays.

Eg: if on thursday close the dow is up for the week go long and exit on friday close

if its down on the week on thursday close go short and exit on friday close.

 

[Bigbusiness]

I have a similar idea which i would be gratefull if someone could back test for me and pos the results.

The dow seems to follow through with the weeks trend on fridays.

Eg: if on thursday close the dow is up for the week go long and exit on friday close

if its down on the week on thursday close go short and exit on friday close.

That is something I have observed before. There is an exception, when the dow closes at its low for the week at the close on Thursday, there is likely to be a bounce Friday, or at least an attempt at higher prices. The reversal also applies to highs of the week at the Thursday close. This was just something I could see when looking through weekly charts, I haven't back tested it.

 

[aaroncapps]

i found the results to be better and smoother across the US indices when you remove the "exit first profitable day"

For the dow - 10/6/1997 - 1/4/2007
$68,630
105 trades
69.52%
avg trade $653.62
peak to valley drawdown - $15,470.00 in september of 98

Great idea, holds up well on the S&P as well

 

[crud-cutter]

So if not 1st profitable day, when does one exit?

So if not 1st profitable day (except for 1st day after the long, when does one exit?

What improvement do you get using your mod to the strategy?

 

[aaroncapps]

So if not 1st profitable day (except for 1st day after the long, when does one exit?

What improvement do you get using your mod to the strategy?

Here is the code i programmed into tradestation 8.1 based on the idea. I omitted the exit on first profitable day and all it uses for the exit is waiting for 4 days.

inputs:trade_day(24),exit_day(4),y(.07);

if dayofmonth(d)>trade_day then begin
if c<o then buy next bar market;
end;
if barssinceentry>=exit_day then begin
sell next bar market;
end;
sell next bar entryprice*(1-y)stop;

 

[aaroncapps]

as a follow up post, this strategy could be great for american style options. You could buy at the money calls that are close to expiration. As the option goes in the money, you would have an option that moves and behaves similar to the underlying futures contract, and if the position turns around on you, then you would have limited risk of just the preium you paid for the option. This could help minimize some of the larger losses.

 

[pertrader]

As it has been over a year since FC introduced us to this system I thought I would have a look on how it has performed to date.

Here are the results of the Disappearing Antarctic Jury...

Since January 16 Dec 05

Points: 690
Trades: 13
Wins: 10
Win %: 76.9%
Pts Per Trade: 53 (before spreads/rollover charges)

Not as good, however following a couple of tweaks I have produced the following results:

Since January 2000.

Points: 7325
Trades: 178
Wins: 150
Win %: 84.3%
Pts Per Trade: 41 (before spreads/rollover charges)

Since January 16 Dec 05

Points: 1485
Trades: 32
Wins: 29
Win %: 90.6%
Pts Per Trade: 46 (before spreads/rollover charges)

An improvement but the next question is how best to trade this.

My options are futures via IB or spreadbetting. While I think on I would be interested in any thoughts.

PER