Sunday 6 November 2011

On 2nd November I described a new way that I can use my indicator that looked quite interesting.  I've been through data on the NASDAQ from 8th September onwards and highlighted all trade signals on it using this new method.  It's here, if anyone's interested.

Essentially, when my indicator deviates from the NASDAQ, I trade in the direction of the indicator, as it can point to short term changes in trend.  In light of this I've re-named my indicator the Positive Deviance indicator.

I've been through the signals from 8th September 2011 to 6th October 2011 and the early results look interesting.

37 signals

20 wins (54%)

10 losses (27%)

7 breakeven (19%)

If traded, the NASDAQ points gained on these signals would be 162.5 (net of commissions), for this one month period.  This equates to 135% return on capital risked (37 X 3.25 points risked per trade).



This is working on the basis of using;

A 3.25 point stop, as before
An 8 point trailing stop, as before
And moving the fixed stop of 3.25 to breakeven if the trade moves 5 points in my favour.

During my period trading from 1st March 2011 until 8th August 2011, I kept statistics on trades showing whether the trade moved at least 4 points in my favour, from the point when the trade was initiated.  Based on the signals that were traded, 56% of the trades reached the 4 point mark.  Also the signals were 50/50, 50% would result in a loss and 50% would result in a gain.  

So far, using this new method, 70% reached the 4 point mark, and so far the winners are 2 to 1.

Although it looks interesting, It's not really wise to draw any firm conclusions on the basis of such a small number of signals, once I've gone through the rest of the data tomorrow I'm looking for it to be consistent with the above.   I could then also look at other markets (other than the NASDAQ) to see if similar results are seen, then I'll have a better idea if I've created a true edge.

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