A cool little strategy

I went to this trading conference and the guy teaching it told us that whole numbers have support / resistance and if the price is above the whole number you'll make money just by buying at the whole number because it usually bounces. Vice Versa for the Short side

So... I ended up taking the past 2 years of data for 1500 stocks both NYSE and NASDAQ and my strategy was...

if at the open of the day the price was between 30.25 to 31.00 and 40.25 to 41.00 and 50.25 to 51.00... etc. Opposite for the short side.

I would place a buy limit order at 2 cents above the whole number, Opposite for the short side. If I was filled I'd hold for 30 min to an hour. All orders were exited EOD


Without slippage and comissions the average profit factor, which is gross wins / gross loss, for the entire 1500 stocks was 1.01.


I've noticed this with a lot of things... a lot of the whole "trading peanut galary" all believe in the same common general truths... truthfully one should only believe after grinding the data themselves. It's really the only thing in this whole trading game that tells the truth...the raw data!

 

I apologize before hand if I'm missing the obvious, but where's the edge?

Anek

 

I guess the 0.01 in excess PF is the hypothetical edge. Not tradable (slippage, commissions etc.) but interesting nonetheless.

 

Just like that tiny little ad that 0.01 is enough to make you rich beyond your wildest dreams!

 

Perhaps your numerical results might improve if you added a trend filter which prevents your strategy from buying stocks that are in screamingly obvious downtrends.

Or perhaps an overbought/oversold oscillator could help you identify situations where it's beneficial not to take the trade. Maybe "whole number AND overbought" is a good time to stand aside & not trade. Possibly "whole number AND either overbought or oversold" is a good time to skip the signal. Test em and see.

 

Bluegar3 is telling us that he was told something at a conference. He tested the idea and could not demonstrate a significantly profitable outcome.

Thanks Bluegar3. I recall reading about similar trading methods but I could never convince myself that the idea actually works.

 

Hook just made me realized that I did not take the time to thank Blue for posting his research.

Thank you Blue.

Anek

 

Basically I was trying to convert NOT that there's an edge, but how what the public thinks it usually no edge at all

 

was the conference free or did you have to pay?