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) haven’t worked as well lately. Market seems choppier, at least for me. I’ve been looking for highly reliable and consistently profitable shorter term (e.g., 2 day) trading strategies as an alternative.
Since I don’t know any highly reliable and consistently profitable 2 day strategies, I thought I’d 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:
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 it’s 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:
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 I’m 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:
This one had more consistency than the Bullish Engulfing. I may trade this one occasionally.
Each filter gave a hit for Friday – 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 they’d care to share, I’d appreciate seeing them.
Has anyone had consistent success using primarily candlestick patterns?
GLTA this week.
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