StockFetcher Forums · General Discussion · 5 day Average Range Filter Help : In need of a genius<< >>Post Follow-up
lvainik
52 posts
msg #45142
Ignore lvainik
6/20/2006 10:27:20 AM

Show all breakouts...


Do you every find yourself wondering which way to trade a particle stock or market? Wouldn’t it be great if there was a simple strategy that you could apply when you’re not sure what direction to trade a market? Is there anyway that we could take advantage of a market that was in the process of “breaking out” for the day? Well the answer to all these questions is a resounding “Yes!” There is a simple strategy that we can apply to our favorite trading vehicle to catch those large intraday moves.

There is a simple formula that we can use to give us clues into a market’s next move. Here it is in a nutshell: A “Breakout Buy” signal can be determined by adding 50% of the five-day average range from yesterday’s close. While a “Breakout Sell” signal can be determined by subtracting 50% of the five-day average range from yesterday’s close.

Using this simple system, you take only one trade a day. If the Breakout Buy level is penetrated first, then we’d initiate a long position. If the Breakout Sell level was penetrated first, then we’d initiate a short position. At the end of the day we would then close out our position. This easy to understand formula would allow you to always catch the large moving days.



Figure 1: Buy when prices breakout above the “Breakout Buy Level” or sell when prices breakout below the “Breakout Sell Level.”

This strategy can be applied to any trading vehicle. One of my favorite instruments to trade is gold futures, because of its volatility. Let’s take a look at an example of August Gold. After prices peaked in mid May the trend shifted to the downside and the overall trend continues to move lower. We’ll start by determining the average five-day trading range for gold. By subtracting the low price from the high price over the last five trading days and then dividing this number by five we can come up with an average five day range.

Day 1 (6-06-06) had a high price of $644.40 and a low price of $630.10 which yields a daily range of $14.30.

Day 2 (6-07-06) had a high price of $636.70 and a low price of $621.20 which yields a daily range of $15.50.

Day 3 (6-08-06) had a high price of $632.40 and a low price of $612.40 which yields a daily range of $20.00.

Day 4 (6-09-06) had a high price of $621.30 and a low price of $604.90 which yields a daily range of $16.40.

Day 5 (6-12-06) had a high price of $613.30 and a low price of $607.00 which yields a daily range of $9.30.

When we divide the five-day range of $75.50 by 5 we come up with an average five-day range of $15.10. Next, we’ll take 50% of this number (or $7.55) and add/subtract it to yesterday’s closing price. The closing price (6-12-06) was $611.50. So, $611.50 + $7.55 = a Breakout Buy Level price of $619.50. Next, $611.50 - $7.55 = a Breakout Sell Level price of $603.95. You can see this labeled on the chart below.

Now that we have determined our Breakout Buy and Sell Levels, we simply employ the use of a Buy Stop order and a Sell Stop order. For the next trading day we place a Buy Stop order at $619.05 and a Sell Stop order at $603.95, remember to make this a day order only. Let’s take a look how this played out. On 6-13-06 August Gold opened at $608.20 then proceeded to trade as high as $608.50 but the upper Buy Stop order was never reached. Prices then turned around and penetrated the lower Sell Stop order at $603.95, when this happened the order was then sent out as a market order and should have been filled somewhere close to the Sell Stop price. After the lower breakout point was activated prices then fell down to a low of $564.50. For the day gold had a trading range of $43.70. Wow! Had we been taken this trade at around the Sell Stop point of $603.95 we could have then placed a MOC (market on close) order to buy back August gold at the close. This would have yielded roughly a $36 point profit for the day. Not bad considering we let the trading vehicle determine our entry price and trade direction.

Some things to remember: You want a stock with some volatility to it and it should be trending in one direction or another. Choppy markets are the hardest to trade because any trading signal you initially receive is likely to be cancelled out as prices quickly change direction. Also, don’t start a trade too late in the day; it is important that you give your trade enough time to perform. There is no reason to enter a trade that only has a few minutes left.


nikoschopen
2,824 posts
msg #45152
Ignore nikoschopen
6/20/2006 12:43:21 PM

Fetcher[
set{range5, sum(day point range,5) / 5}
set{range, range5 / 2}
set{BBL, close 1 day ago + range}
set{BSL, close 1 day ago - range}
ADX above 30
price above 20
avgvol(17) above 300000

add column BBL
add column BSL
add column range
add column range5

draw BBL on plot price
draw BSL on plot price
]




lvainik
52 posts
msg #45154
Ignore lvainik
6/20/2006 2:35:26 PM

Thanks!!!!!


TheRumpledOne
6,358 posts
msg #45238
Ignore TheRumpledOne
modified
6/24/2006 10:54:16 AM

Fetcher[
/* 5 day Average Range Filter with Middle */

set{range5, sum(day point range,5) / 5}
set{range, range5 / 2}
set{BBL, close 1 day ago + range}
set{BSL, close 1 day ago - range}

set{xMid, BBL + BSL}
set{BMid, xMid * .50}

draw BBL on plot price
draw BSL on plot price
draw BMid on plot price

add column BBL
add column BMid
add column BSL

add column range
add column range5

close above BMid

ADX above 30
price above 20
avgvol(17) above 300000
]



This looks interesting...

I added the midpoint between the 2 bands and selected stocks that CLOSED above the midpoint.






TheRumpledOne
6,358 posts
msg #45239
Ignore TheRumpledOne
modified
6/24/2006 10:55:34 AM

Fetcher[
/* 5 day Average Range Filter with Middle */

set{range5, sum(day point range,5) / 5}
set{range, range5 / 2}
set{BBL, close 1 day ago + range}
set{BSL, close 1 day ago - range}

set{xMid, BBL + BSL}
set{BMid, xMid * .50}

SET{HiOp, high - open}

draw BBL on plot price
draw BSL on plot price
draw BMid on plot price

add column HiOp

add column BBL
add column BMid
add column BSL

add column range
add column range5

close above BMid

ADX above 30
price above 20
avgvol(17) above 300000
]



This looks interesting...

I added the midpoint between the 2 bands and selected stocks that CROSSED above the midpoint.






StockFetcher Forums · General Discussion · 5 day Average Range Filter Help : In need of a genius<< >>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