- Data for testing
- Point A
- Failed Point A
- Point C
- Pivot range
- W-pivot range -new
- Points A and C through the pivot
- Closing method -new
- Dynamics of Points A and C
- Significant time frames
- Entry and exit
Now I will describe the test results based on the idea of the ACD method of using Points A and C through the pivot to open and close a trade (see page 55 of The Logical Trader). According to the idea, a trade is opened when Point A or C is established and the market breaks through the pivot.
Suppose A up is established, but the market cannot break through the upper border of the pivot range. Then the trade is not opened. After that, C dn is established, and the market breaks through the lower border of the pivot range. Then a short position is established. The trade is closed when the market breaks through the pivot in the opposite direction. Closing may occur on the current day or on some day in the future. Points B and D are not used to close.
The question is how to determine the moment of opening a trade in the following case. Suppose A up is established, but the pivot is not broken through. After that, the market dives below A value, but soon recovers and breaks through the pivot. And suppose that the time between the second breakout of A value and the breakout of the pivot is less than half the duration of the opening range. In this case, the program does not open a trade until a time equal to half the duration of the opening range has passed after the second breakthrough of A level, as if Point A had been reset. This case is illustrated in Fig 7.1.
Such a strict approach to establishing a position reduces profit compared to immediate opening after a pivot breakout.
The test results for the 1-day pivot for SBER stocks are presented in Table A.8 in the Appendix. If you compare it with Table A.2 for closing at the end of the trading day, you can make the following observations:
These observations are true for most other securities. For most securities, even a 4-minute opening range provides returns comparable to returns for higher opening range time frames.
The program calculated for a different number of days in the pivot – from 1 to 5. The optimal number of days in the pivot in terms of profit is not the same for different securities. The largest profit on most securities was received for a 1-day pivot.
Average profit and p/l for breakout levels from 0 to 100 ticks for a 1-day pivot, different opening range time frames and securities are presented in Table A.11 in the Appendix (see the 7th row for each security). The accumulated profit by days from Point A through the pivot compared to other strategies is shown in Fig 8.2 in chapter 8.
In general, a sufficiently high profit and p/l for most securities received from Point A and C through the pivot prove that as soon as the pivot is broken through, a significant movement in the direction of the breakout is very likely.