So I've automated and tuned the following strategy that I use on gapping sticks each morning. it wins 50% of the time and has a sharpe ratio in the 1.8+ range (see attached spreadsheet). My question is can anyone think of a better way to control the stop outs other than using Vwap? I use Vwap as a way to smooth the price action in the first 15mins as gapping stocks tend to be very volatile by nature. 1/ Enter (over/under H/L) in the direction of the first 5min bar with a stop at the first 5min bars open. Use a STPLMT order with a range from the Entry Limit table. 2/ Bar must be within the Entry Limit table % Range Bar. i.e in this case 2% 3/ If the position is not filled by 10:50 cancel the order. 4/ Add 1c to the entry price and round over/under whole/half numbers in the direction of the trade, same for stop price. 5/ After 9:35 and before 10:50 if the Vwap falls below the H/L before open position filled cancel open position. 6/ If 9:35 bars body is less than 10% of the H/L and Vwap is within O/C cancel strategy i.e. Doji bar. 7/ The entry price - stop price must be 2X the STPLMT amount from the Entry Limit. i.e. prevents entries on Narrow Range Bars. E.g. If first 5min bar is H=21.50 L=21.15 Open= 21.2 Close=21.40 then position order will be Buy STPLMT=21.51-21.55 (STPLMT range 0.04 from EntryLimit table and as we are at 21.5 we also buy over/under whole/half numbers), Quantity=Risk/(21.51-21.2) rounded to +/-100 shares (see EntryLimit table). Entry limit takes is a table of stock price range and values The app and actual strategy can be found at: https://code.google.com/p/trade-manager/ James
Not much I understood about the above ... let's say ... "First 5-min bar Opens at 100 (which is also the Low), and Closes at 101 (which is also the High)"... Where does the entry go, and what type of entry is it? Where does the stop go? Thanks
<< 1/ Enter (over/under H/L) in the direction of the first 5min bar with a stop at the first 5min bars open. Use a STPLMT order with a range from the Entry Limit table. >> Seems like a "breakout/breakdown" entry, which would at least (partially) explain the 50/50 stat. If that's accurate, I suggest waiting for a CLOSE above/below the H/L of the first bar -or- use the PRINT above/below of H/L AS THE TRIGGER, entering at the NEXT higher/lower print. It's at least some sort of confirmation (but not as good as waiting for a close above/below the first bar.) In any case, IMO, it's entering ON the break PRINT itself that is cause of your 50/50 stat. Also FWIW, I use faster bars.