Mechanical triggers

[stoploss please]

Hi

I have been doing some research on mechanical triggers for trading the Dow on a thirty minute time scale.

What I am trying to is find a trend following trigger that stops me getting whipped out of a position because I entered too early.

Anyway, I have applied the following to my chart.

Bollinger band centered on a 20 period sma.

40 sma

100 sma

The 100 sma identifies the current trend.

The bollinger band is used and overbought/sold and price target
indicator.

The 40 sma is my trigger. On the down trend since the 17/06,
when ever the price action has broken above the 40 sma, a short position is entered on its recrossing to the down side. The only proviso is that the 40 sma is above the centered bollinger band.

I hope that makes sense. Its probably a pile of pants but you have try these things.

 

[bansir]

hi SP,
looks interesting, a good while back I tried out something similar with paper trading
some LSE listed companies.
The strategy was long only. It tended to fall down during a ranging price phase, as you would expect.
have you carried much back testing using this system?
best regards,
neil

 

[stoploss please]

Hi Neil

With it being July 4, I have taken advantage of today to fine tune the entries and exits and it looks promising.

In a downtrend when used in conjuction with a rsi (14 & 28) and candle patterns, it manages to stop you trading the whipsaws. I think the key is you have let evey one else take the gambles on the shorting. You just wait for the weak upside momentum to kick in on the re-crossing of the 40sma to the downside.

There were four shorting signals between the 20/6 and 30/6 and each time the Dow tanked. The target being the lower bollinger band. It would have also stopped you from going short on 1/7 rally as the price action did not recross the 40 sma.

It does not work at all in an up trend however I am looking at using swing lows together with candle stick formations and rsi confirmations to try and target entries at the 40 and then the 100 sma. The upward crossing of the 50 level on the 28 rsi when the 14 rsi is overbought seems to be the best window of oppurtunity.

For a strange reason, This method seems to work in picking the mirco rallies in down trends in the 30 minute time frame. I have as tried applying this to other time frames but with no real success.

Have you kepted the results of your paper trading. It would be interesting to compare notes.

Cheers
Andy

 

[bansir]

Hi Anndy,
Blimey, you're using RSI+candles+Bol. Bands+MA's?
Makes my approach look v.simple.

I do still have the results of the back-testing. It was all done by hand, just used chart print outs from ShareScope. It was a couple of years ago now.
My tests were with LSE share prices covering a 5 year span, using daily close prices, so I think we may be comparing apples with pears so to speak.

For what it's worth here's a sumary of one of the tests:
TickerAG
Bolinger Bands, 200 day av.
Long Only

1)Go long when price moves into the band range from below the band range or -
the price moves from inside the band to above the band range.

2)Close out when price moves into band range from above the band range or -
the price moves from inside the band to below the band range.

not exactly rocket science eh

Test Period:1994:2001-like I said longish time period

Total no. of trades :14 very few sigs!
winners: 9
losers: 4
break even:1

biggest wining: +88p per share
biggest losing trade: -31p per share
biggest winning run: 3 trades resulting in +124p per share profit
biggest draw down: 1 trade of -31p per share loss

overall profit: 213p per share

But I guess the market is different now?

All the best,
Neil

 

[bansir]

By the way, if you can track down JonnyT, he's ace at this sort of thing!

Neil

 

[stoploss please]

Hi Neil

What I am finding is that I have a good idea were the price action is heading but I keep getting spooked out of winning positions. The problem is bad market timing. So what I am trying to do is trying to be in sync with momentum. By using this combination of indicators and chart set ups seems promising however as you said, the market is always changing and what works today may not work tomorrow.

It was interesting to hear of the success you had in paper trading with a similar method. What stopped you taking it further.

Cheers
Andy

 

[bansir]

Hi SS,
When I tested it accross a range of shares it proved unreliable.

I eventually realised that I needed to look using at systems which allowed me to go short aswell as long.
Best Regards,
Neil