I recently wrote close how I purpose empirically-derived cost targets to merchandise intraday moves inwards the S&P 500 Index. This approach builds on the pivot-based methods I described 2 years ago, inwards that the cost targets are a articulation component of recent cost induce in addition to recent volatility. I receive got tested these levels going dorsum to 2000, amongst roughly a 75% hitting charge per unit of measurement for touching yesterday's pin degree inwards today's trading in addition to a 75% hitting charge per unit of measurement for touching *either* the upside R1 or downside S1 levels derived from yesterday's trade. An event of how I purpose these levels tin laissez passer on the axe hold out establish in this recent post.
Although my methods for calculating these levels remain proprietary for now, I postal service the levels for SPY each morn via Twitter prior to marketplace opens (free Twitter subscription via RSS). Also included inwards my morn posts are information that capture strength/weakness inwards the previous day's trade. These information include the pct of SPX stocks trading inwards a higher house their moving averages; Demand/Supply (an index of the issue of stocks trading above/below the volatility envelopes surrounding their moving averages); in addition to the issue of stocks making fresh 20-day highs in addition to lows.
As a rule, inwards a rigid in addition to strengthening market, I'll await for cost to remain inwards a higher house the pin degree in addition to exam R1 in addition to R2 levels. In a weak in addition to weakening market, I'll await for cost to remain below the pin degree in addition to exam S1 in addition to S2. In a make fountain marketplace of mixed strength, I'll await for prices to revert to their pin levels on moves toward R1 in addition to S1. The sentiment is to purpose the ongoing current of marketplace information (volume/volatility; leading sector behavior; marketplace themes; cumulative TICK) to approximate the odds of hitting these cost levels in addition to thence teach into the marketplace at points that render favorable risk/reward (e.g., your halt degree is closer than your target point).
Often, non always, 1 degree volition serve equally a target (say, S1) in addition to unopen to other (pivot) volition serve equally my stop. In other words, if we're inwards a short-term downtrend, my merchandise says nosotros should hitting S1 in addition to remain below the prior day's pin (which is an approximation of average trading price). Many merchandise ideas tin laissez passer on the axe hold out crafted yesteryear knowing these levels, assessing the market's strength/weakness solar daytime over day, in addition to gauging the strength/weakness inwards the electrical current session's data.
Suppose, however, you lot are a swing trader looking to merchandise less oftentimes in addition to receive got to a greater extent than out of marketplace moves. Such a trading agency is ideal for those that don't desire to hold out married to the shroud intraday. I've been working on an adaptation of the inwards a higher house trading methods for the wider timeframe in addition to instantly receive got a backtested ready of parameters based on weekly data. The weekly pin has an 80% hitting charge per unit of measurement (i.e., going dorsum to 2001, the electrical current calendar week has touched final week's pin 80% of the time), in addition to the odds of hitting either the weekly R1 or S1 levels is close 75%; R2 or S2 is 50%.
Once again, yesteryear gauging marketplace strength/weakness solar daytime over day, the swing trader tin laissez passer on the axe play for multi-day moves to the R1/S1 levels in addition to beyond. The weekly target numbers too enable short-term (intraday) traders to teach out a slice of their positions on overnight to receive got payoff of the moves to the weekly levels.
These weekly levels inwards SPY volition hold out published Mon earlier the marketplace opened upward and, again, volition hold out costless of accuse via Twitter. For traders that prefer to non subscribe via RSS, the final 5 Twitter posts ever appear on the spider web log page nether "Twitter Trader", thence you lot tin laissez passer on the axe exactly cheque the spider web log prior to marketplace opens for the target data. Over time, I excogitation to expand the targets to other indexes (NASDAQ 100, Russell 2000, sector/international ETFs), equally good equally other property classes (bonds, gold, oil, etc.). Stay tuned!
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