The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at toddstrade@gmail.com
I am always open to questions, comments, or suggestions on how to improve this blog.


Thursday, June 4, 2009

First Cross study

After watching the performance of the "First Cross" method for the past month or so I would like to present the results I have gotten. First I'll direct you to this post and this one, regarding the 3/10 macd and some of it's intricacies.
Now, I wasn't able to program this as an automated strategy because I haven't worked out the exit rules, those (for now) are based solely on discretion. So, the results are based on a SPY 10-min chart. I have found this timeframe to reduce whipsaw signals while also presenting ample entries for intra-day trading.
Entry is based on a First Cross signal (red/green dot on the bottom of the chart) AND a break of a two-period price channel (highest high of the last two bars, lowest low of the last two bars). I didn't include entries that broke a 2-period channel immediately following a signal entry. However, these can present opportunities that are just as good. Stops were based on the previous bar's low (for long entries, previous bar's high for short entries). These stops can also entertain some discretion depending on the range of the bar the entry is given on; if entry is a wide range bar the stop/risk can be shortened.
So, out of 29 trading sessions there were 21 entries based on the rules mentioned above.
16 entries went in your direction and relied on you to take profits accordingly.
5 entries were stopped out.
+68.75%
Here are some charts, the green vertical line marks a profitable entry taken:Here are some that didn't work (red vertical line), either b/c of a stop-out, or due to a move in your direction that turned around. Again, these are discretionary trades.Here are some entries that worked on the bar immediately following the signal (not included in the statistics:
Another mention regarding discretion; Some of these entries could have been successfully swing traded, so long as the stop is measured accordingly (previous swing low/high) and you have a clear target in mind based on longer-term Support/Resistance.
Also, I based this study strictly on SPY, simply b/c of the liquidity and relative order in the SPY tape (in other words the market cycles in and out of trends, instead of staying in a chop for long periods). So, using it successfully on other stock issues just requires some range and liquidity to be inherent (I did the same study on FCX and got 23 entries that resulted in 16 out of 7, or +69.5%).
If anyone has anything to add to (or even detract from) this post, please feel free to comment.

1 comment:

Benlharrell@gmail.com said...

Just thought I would leave a quick thought. Why not try only the trades that trace the fast moving line below the zero line?