Been looking at price history on indices (specifically the FTSE 100 index), looking at a 1,2,3 day breakout strategy. The idea is simple - buy or sell a break of the 3 day high/low of the index by a set % (I'm playing with 0.05% at the moment). The total number of entries is pretty low, fewer than 3 per week for the 3 day break, 4 for the 1 day break, but the potential profits are interesting. Be very interested to hear from anyone who has done some decent backtesting/analysis of such systems.
Exits are taken in stages, employing a fixed stop then progressive factor of initial risk (ie R multiple). as I say, I'm just looking at the data at the moment, was hoping someone had done some work of such systems.
Hi Mo, Back in 1993, I spend a year to 18 months doing quantative studies of FTSE index and stocks, and Dow strings of data. Optimisation and system testing. One of the conclusions of the study was that the results change with the set of data, especially when the index was trending or in consolidation. The results changed hugely. After back testing a system, adjustments were made, to make the system fit. Then it didn't in the future for the same reason. May I guess your systen would work well in a trending market, but could suffer when it in a very narrow range where break outs are faded. Regards WC