What sort of market is this?
- This topic has 2 replies, 2 voices, and was last updated 5 years ago by
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Before creating a strategy or manual trading it helps to know the nature of the beast that you are betting against. I use a simple little tool to tell me what each markets type is and to see what it has been in the past.
The indicator simply tells me first of all the percentage of red candles compared to green and then it returns equity lines for trending after a green candle or after a red candle and mean reversal after a green candle or red candle. These are simply calculated by the result of going either long or short after each candle and closing the position one candle later.
From the lines returned we can instantly see if there is a long or short bias to the market from the percentage of green and red candles and we can see whether it is a mean reverting after a red candle or mean reverting after a green candle or trending after a green candle or trending after a red candle sort of market.
It is also interesting to see how the markets have changed over the years if you apply it to a daily chart.
It is always a good idea to know what is currently working and how long it has been working for before creating a strategy for any market as there is no point in trying to make life hard for yourself by trying to create a trending short or a go short mean reversal strategy in a market that is clearly a go long mean reversal market or a trending long market.
Before anyone gets excited at the equity curves bear in mind that there is no spread in them!
Toggle the equity lines on and off with the ‘equitylines’ setting.
Attached are images of the EURUSD and SP500 1 hour and daily charts and it can be clearly seen the differences between them. On the daily currently the SP500 is a go long mean reverting market but also a pretty good go long trending market whereas the EURUSD is clearly very much a mean reverting market with a slight emphasis on going long over going short.
I post the indicator here in case it is of any use to anyone.
123456789101112131415161718192021222324252627equitylines = 1 //0=off 1=onif close[1] > open[1] thencount = count + 1gr = gr + 1gtrend = gtrend + (close - open)gmr = gmr + (open - close)endifif close[1] < open[1] thencount = count + 1re = re + 1rtrend = rtrend + (open - close)rmr = rmr + (close - open)endifgperc = (gr/count)*100rperc = (re/count)*100if not equitylines thenrtrend = undefinedgtrend = undefinedrmr = undefinedgmr = undefinedendifreturn gperc coloured(0,128,0) as "green win rate", rperc coloured(128,0,0) as "red win rate", gtrend coloured(0,255,0) as "green trend", rtrend coloured(255,0,0) as "red trend", gmr coloured(0,128,0) as "green mean reversal", rmr coloured(128,0,0) as "red mean reversal"I can’t keep up with all these new ideas
Nothing new – just sharing a few bits and bobs that I think others might find useful if they don’t use something similar already.
My girlfriend joins me in Greece again tomorrow so the amount of the sharing might dry up a little due to other demands – unfortunately mainly boat jobs that she thinks I should have done already!
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