Simple Dow Strategy.

[schoe]

Hi all, this is a very simple strategy I have been considering using I have been paper trading it for a while and was hoping for other peoples comments to improve it/ or tell me its not viable long term.
Most days between close and open the next day the Dow consolidates, you buy above this consoldation by putting in a buy stop and sell below it normally this involves a difference of 30/40 points between the buy and sell. if you are brave you can double up on the reversal.
I have been taking my profits by using discretion and guessing the strength of the move in whichever direction I am trading. If the trade reverses once then the stop to close would be the first buy/sell point. So the most points you can lose is 80 points if it reverses twice.
I do not use any indicators, what would obviously cause maximum losses on this system is the dreaded whipsaw action that can occur somtimes but normally you get movement in one direction or another from the open.
Suggestions/comments please.

Thanks

 

[FetteredChinos]

Schoester...

am i correct in assuming that you limit yourself to just the two trades a day?


if you dont then the whipsaws on some days could wipe you out!!

if you have a look through the charts on the Dow Intraday threads and try to find one of the days with tight consolidation (which has been happening recently as volatility dries up) you will see that it could be rangebound pretty much all day. and if you are losing 40-50 points several times a day, a couple of bad days and you will be out of the game in no time!!

also the attempt to "guess" the strength of the move is asking for trouble. You would do well to read Chartmans advice on a simple, but not infallible, method of assessing the strength of a move via a ratio of price/RSI.

even so, i wish you luck with your testing..but please remember that paper trading is only a pale imitation of when you have sizeable amounts on the line. could you still run your system at £100/point after a few losing trades in a row? you must have absolute faith in your system to be able to do this!

hope this helps

FC