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Interesting slope on the second graph. Have you backtested your strategy? How does the slope compare w/ expected returns?

 

Cf.,

Developing Robust Trading Systems

The Role of Backtesting in Trading System Development

 

 

 

Thanks for the links, yes I backtested the strategy and it worked well, although it isn't working at the moment. I need to work out whether recent performance is temporary or terminal.

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A look at the number of occurences of daily ranges on Dow Jones Industrial Average futures from 2010-2013;

 

DJIAdailypointsrange_zps2eb8c532.png

 

The most frequent range over the 4 years was 94. Most frequent range tends to be around 75 to 150 points.

 

 

 

Daily range occurence broken down by year (moving averages);

Image_zps8099eaa3.png

 

The wide range of daily points ranges for 2011 seems to reflect increased volatility that year but that aside, the pattern is broadly similar each year. Although we can see that ranges from 90 to 125 have become more frequent over the years.

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A look at the daily range on Dow Jones Industrial Average futures, relative to price, over the last 4 years;

 

image0-3_zps579af5b1.png

 

Nice chart! Plotting the daily range like this seems to do a nice job in locating intermediate-term bottoms ... especially considering the "fat-tail" distribution (below).

 

 

A look at the number of occurences of daily ranges on Dow Jones Industrial Average futures from 2010-2013;

 

DJIAdailypointsrange_zps2eb8c532.png

 

The most frequent range over the 4 years was 94. Most frequent range tends to be between 75 and 150 points.

Looks like it would be worthwhile plotting the standard deviation of the daily range vs price ?

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Nice chart! Plotting the daily range like this seems to do a nice job in locating intermediate-term bottoms ... especially considering the "fat-tail" distribution (below).

 

 

Looks like it would be worthwhile plotting the standard deviation of the daily range vs price ?

 

 

It's an interesting relationship isn't it. What do you think the standard deviation of the daily range vs the price would show?

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It's an interesting relationship isn't it. What do you think the standard deviation of the daily range vs the price would show?

 

I'm not sure. And (more importantly) I'm not sure how actionable the findings might be. But the rationale would be that by plotting the distribution in terms of standard deviation you might be able to isolate the "fat tail" ... and the underlying hypothesis would be that the "fat tail" provides a disproportionate edge as an entry signal.

 

E.g., for a look back period of 200 days: (('daily price range' - 'mean daily price range') / 'standard deviation price range') vs price.

 

Something along those lines ?

 

 

Anyway, by itself it's probably not sufficient for a reliable indicator, but it might be a useful filter?

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A look at the number of occurences of daily ranges on Dow Jones Industrial Average futures from 2010-2013;

 

 

 

The wide range of daily points ranges for 2011 seems to reflect increased volatility that year but that aside, the pattern is broadly similar each year. Although we can see that ranges from 90 to 125 have become more frequent over the years.

 

Careful with this.. 90 points when the Dow is at 8,000 is very different from 90 points when the Dow is at 16,000.

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