any relationship between day range

Discussion in 'Strategy Development' started by flyingforget, Aug 12, 2008.

  1. usually I calculate the dayrange with highest high of the day
    minus lowest low of the day.I find the day range expands and contracts periodicly.If the day range is great today, in the following day the day range tends to be small and vice versa .
    Is there anyway to verify my assumption?
     
  2. Which instruments are you analysing?
     
  3. CBuster

    CBuster

    if you have a large sample of data, you could do a test for serial correlation in range size

    If you're looking for something more accesible to a non-stats trained guy, a simple test in Excel might be:

    1) Test the av range of all days in the sample period
    2) Test the av range of all days in the sample period IF the prior day range was [x%] bigger than the overall average
    3) Test the av range of all days in the sample period IF the prior day range was [x%] smaller than the overall average

    If your theory is correct, results should show [2] < [1] < [3]

    Play around with this concept using various sizes of X and it should give you a decent idea of whether you're right or wrong.
     
  4. eagle

    eagle

    Many years ago, I found this formula from Forbes.com to predict the next day's support and resistance of a stock price using previous day (High, Low, Close). By the way, I never watched it closely, nor confirmed its credibility. It's good if somebody have a watch on it and give some feedback about its validity. Here we are...

    H = previous day's high
    L = previous day's low
    C = previous day's close

    Pivot Point (P) = (H + L + C) / 3

    First area of resistance : R1 = 2P - L
    First area of support : S1 = 2P - H
    Second area of resistance: R2 = P + H - L
    Second area of support : S2 = P - H + L

    Example of Nortel Networks Corporation. (NYSE: NT)
    Date Open High Low Close
    13-Aug-08 5.91 6.01 5.80 5.93

    P = (6.01 + 5.80 + 5.93) / 3 = 5.91333

    R1 = 2 * 5.91333 - 5.80 = 6.03
    S1 = 2 * 5.91333 - 6.01 = 5.82
    R2 = 5.91333 + 6.01 - 5.80 = 6.12
    S2 = 5.91333 - 6.01 + 5.80 = 5.70

    Hence, today's resistance & support will be ($6.03, $5.82) or ($6.12, $5.70).

    PS: This formula is applicable if and only if there is no major news about NT, meaning that it's trading within a normal breath.
     
  5. eagle

    eagle

    And here is GE for Don. :)

    General Electric Company. (NYSE: GE)
    Date Open High Low Close
    13-Aug-08 29.58 29.66 29.08 29.31

    P = (29.66 + 29.08 + 29.31) / 3 = 29.35

    R1 = 2 * 29.35 - 29.08 = 29.62
    S1 = 2 * 29.35 - 29.66 = 29.04
    R2 = 29.35 + 29.66 - 29.08 = 29.93
    S2 = 29.35 - 29.66 + 29.08 = 28.77
     
  6. eagle

    eagle

    I will provide the update on NT and GE and the end of day. No guarantee about the formula, it's up to someone to test it with several data and validate it; maybe profit from it. But remember, this is for a stable stock and no major news for that trading day. Normal quiet trading day, right.
     
  7. In market profile parlance, you can say that initiating range extension is followed by range compression. The "key" is to realize where and when the next extension is happening from the current narrow-range day.
     
  8. Tums

    Tums

  9. eagle

    eagle

    GE is on track with MoE ± 0.13%, the high ended at $29.89 instead of $29.93. While NT got a bit off track with MoE ± 0.98%, the high ended at $6.18 instead of $6.12.

    Based on the today's prices (HLC), we can estimate, if no major news happens, for tomorrow Friday August 15, the trading range for GE and NT would be...

    GE small range ($29.06 - $29.94) or large range ($28.59 - $30.35).
    NT small range ($5.95 - $6.22) or large range ($5.79 - $6.33).

    PS: Use the formula at your own risk. :D
     
  10. eagle

    eagle

    Not trying to convince anyone but it's quite interesting though...

    GE was trading within a short-range reaching the first resistance of $29.94 ($30.05) with MoE ± 0.37%; while NT was trading within a long-range reaching the second resistance of $6.33 ($6.35) with MoE ± 0.32%.

    Maybe someone can use this formula for ES, SPY????? I leave it to anyone who's interested to investigate further and study about this formula. I'm concentrating on development of a system called Spike Signal. :D
     
    #10     Aug 15, 2008