StockFetcher Forums · Filter Exchange · Backtesting Bullish Candlestick Patterns<< >>Post Follow-up
trendscanner
265 posts
msg #80614
Ignore trendscanner
10/4/2009 9:08:49 PM

The swing strategies that worked well for me earlier this year (mainly buying dips of good quality stocks) havenít worked as well lately. Market seems choppier, at least for me. Iíve been looking for highly reliable and consistently profitable shorter term (e.g., 2 day) trading strategies as an alternative.

Since I donít know any highly reliable and consistently profitable 2 day strategies, I thought Iíd test some bullish candlestick patterns this weekend and see if they provided something to work from.

I started with the Bullish Engulfing pattern. If you backtest the filter:

Fetcher[
Bullish engulfing
]



for the May1 through Sept 1 09 time frame, using a 10% stop loss, no profit stop and a 2 day max holding time, you get the following results:

There were 2125 total stocks entered. Of those, 2076 or 97.69% were complete and 49 or 2.31% were open. Of the 2076 completed trades, 1052 trades or 50.67%resulted in a net gain. Your average net change for completed trades was: 0.14%. The average draw down of your approach was: -3.83%. The average max profit of your approach was: 3.84% The Reward/Risk ratio for this approach is: 1.07 Annualized Return on Investment (ROI): 18.23%, the ROI of ^SPX was: 41.72%.

Basically, this says itís almost a wash, (slight statistical edge). Underperformed the market and way too many trade opportunities to be a feasible strategy.

I applied a trial and error process to the basic filter to try to tease out what the best situations seem to be for using this pattern. After testing various methods, I came up with a filter that produced the following results:

There were 21 total stocks entered. Of those, 20 or 95.24% were complete and 1 or 4.76% were open.
Of the 20 completed trades, 12 trades or 60.00%resulted in a net gain.
Your average net change for completed trades was: 3.76%.
The average draw down of your approach was: -2.38%.
The average max profit of your approach was: 8.63%
The Reward/Risk ratio for this approach is: 6.37
Annualized Return on Investment (ROI): 464.24%, the ROI of ^SPX was: 41.72%.
Stop Loss was triggered 0 times or 0.00% of the time.
Net 2 day change was 4.4%

The filter I used was:

Fetcher[
/* Bullish Engulfing */

set{r1, high - low}
set{r2, close - open}
set{r3, r1 / r2}
bullish engulfing
close is between 1 and 20
average volume(30) is between 60000 and 1000000
volume is 50% above average volume(30) one day ago
volume above 100000
volume above volume 1 day ago
eps > 0
r3 < 1.3
close gained less than 10%
close gained less than 15% last 9 days
Close-to-open gap > -3 last 15 days
]



This produced far fewer trades but an attractive ROI, greater percent profitable and more upside than downside. Not as consistently profitable as I was hoping for since only 60% are winners. I may trade this filter occasionally although Iím not likely to go long within the next week or two until I get a better sense where the market is headed.

I also spent some time working with Bullish Morning Doji Star. Backtesting the basic pattern (same time frame and settings) gives the following results.

There were 2025 total stocks entered. Of those, 1980 or 97.78% were complete and 45 or 2.22% were open. Of the 1980 completed trades, 890 trades or 44.95%resulted in a net gain. Your average net change for completed trades was: 0.71%. The average draw down of your approach was: -5.57%. The average max profit of your approach was: 6.20% The Reward/Risk ratio for this approach is: 1.24 Annualized Return on Investment (ROI): 100.26%, the ROI of ^SPX was: 41.72%.

Using trial-and-error I ended up with a filter that provided the following results:

There were 25 total stocks entered. Of those, 25 or 100.00% were complete and or 0.00% were open. Of the 25 completed trades, 17 trades or 68.00%resulted in a net gain. Your average net change for completed trades was: 2.77%. The average draw down of your approach was: -2.21%. The average max profit of your approach was: 5.45% The Reward/Risk ratio for this approach is: 3.85 Annualized Return on Investment (ROI): 342.10%, the ROI of ^SPX was: 41.72%.

The filter I used for these results is:

Fetcher[
not otcbb
close between 1 and 15
Day Range below 10% last 10 days
day range below 20% last 30 days
Count(close dropped more than 15%, 20) < 0.5
Close-to-open gap between -3 and 10 last 4 weeks
average volume(90) 1 day ago between 50000 and 1000000
bullish morning doji star
Chande Momentum Oscillator(20,9) below 0 within last 3 weeks
slope of Average Chande Momentum Oscillator(20,9) > 0
draw Chande Momentum Oscillator(20,9)
]



This one had more consistency than the Bullish Engulfing. I may trade this one occasionally.

Each filter gave a hit for Friday Ė GIB for bullish engulfing and HTX for Bullish morning doji star. Not expecting to trade them on Monday, will watch and see how they do.

If anyone has any consistently reliable and profitable 2 day strategies theyíd care to share, Iíd appreciate seeing them.

Has anyone had consistent success using primarily candlestick patterns?

GLTA this week.









chetron
2,817 posts
msg #80616
Ignore chetron
modified
10/4/2009 10:14:49 PM

THOUGH I DON'T USE CANDLE STICK PATTERNS, THE POPULAR THOUGHTS THAT I HAVE HEARD IS TO COMBINE CANDLE STICK PATTERNS WITH MOVING AVERAGE, STOCHASTIC AND MACD CROSSINGS. THE KEY THOUGHT I GOT WAS "CROSSING".


HTH


johnpaulca
11,289 posts
msg #80617
Ignore johnpaulca
10/5/2009 12:20:26 AM

trendscanner...have you looked at inverse ETF's , they are all awakening from a long slumber.

trendscanner
265 posts
msg #80619
Ignore trendscanner
10/5/2009 6:17:42 AM

Chetron and John Paul, thanks for the suggestions.

I have a small amount of experience with the inverse ETFs and they sound like a good fit for my increasingly bearish short term perspective. Will probably have a try at a few of them and see how that works.

StockFetcher Forums · Filter Exchange · Backtesting Bullish Candlestick Patterns<< >>Post Follow-up

*** Disclaimer *** StockFetcher.com does not endorse or suggest any of the securities which are returned in any of the searches or filters. They are provided purely for informational and research purposes. StockFetcher.com does not recommend particular securities. StockFetcher.com, Vestyl Software, L.L.C. and involved content providers shall not be liable for any errors or delays in the content, or for any actions taken based on the content.


Copyright 2016 - Vestyl Software L.L.C.Terms of Service | License | Questions or comments? Contact Us
EOD Data sources: DDFPlus & CSI Data Quotes delayed during active market hours. Delay times are at least 15 mins for NASDAQ, 20 mins for NYSE and Amex. Delayed intraday data provided by DDFPlus