augieboodicators

[augieboo]

Posted by: market_watcher
In reply to: augieboo who wrote msg# 6116 Date:8/3/2003 4:51:57 PM
Post #of 7534

After some noodling around in Excel, here is the system that I came up with:

1. Always buy the open on the first day after the signal.

2. If the first day is positive, hold another day. If the first day is negative, sell at the close.

3. If the first day was positive and the second day is negative enough to bring you back to breakeven, sell at the breakeven point. Otherwise hold until the end of the second day.

4. If the second day is negative at the close, sell at the end of the second day, even if you are above breakeven.

5. If the first day was negative but at the end of the second day, the trade would have been positive, buy at the open the third day.

6. If the third day is negative enough to bring you back to breakeven, sell at the breakeven point. Otherwise hold until the end of the third day.

7. If the third day is negative at the close, sell at the end of the third day, even if you are above breakeven.

8 etc. Repeat for 4th and 5th days.

The way I calculated it 307 trades are winners and 106 trades are losers and 49 stopped out. The losers and the stop outs are very close, but could be off by a couple of trades because of the stop loss calculation logic, which is a little messed up, but doesn't invalidate the whole thing.

This strategy turned $1 into $139 over the time period in question. That $139 slightly overstates the return because the the stop loss messed up the return on 17 trades. In the spreadsheet, I put X's next to those trades. If you want to mess around with the logic to fix it, you can calculate the historical performance more accurately. If I were to guess, I don't think it impacts the overall return by more than 10%, so you could decrease the overall return to $126 and be in range of the actual return. At its peak the COMP had a $20.36 return. Average return is 1.09% per trade. Average holding time is 3.17 days. I'll post the spreadsheet on my site:

http://www22.brinkster.com/marketwatcher/

I hope that is along the lines of what you're looking for. I think it's a good system because it gets you out of bad trades very quickly and gives you a second chance to jump in if a trade turns around. Another nice thing is that it's making it's all-time highs now, so you know that it works in a bear market as well as a bull.